How outstanding check works
Outstanding checks are one of the most common reconciling items in a bank reconciliation. The business subtracts the check from its book balance the moment it is written, but the bank does not subtract it from the account until the payee deposits it, which can take days or weeks depending on the payee's habits, and occasionally never happens at all.
A bookkeeper tracks outstanding checks on a reconciliation worksheet and follows up if one stays open too long, since state unclaimed-property laws generally require a business to escheat funds from checks that go uncashed for an extended period, often one to five years depending on the state. A stale check may need to be voided and reissued, and the business should confirm with the payee before writing a replacement so it does not end up honoring both.
Example
On March 28, a company writes check #1042 for $2,750 to a supplier and records it in the books immediately. By the March 31 bank reconciliation, the check has not yet been cashed. It appears as a $2,750 outstanding check, meaning the bank balance is $2,750 higher than the book balance until the supplier deposits the check the following week.
Outstanding check in QuickBooks Online vs Xero
QuickBooks Online's reconciliation screen lists every check written but not yet cleared as an unmatched item until the bank feed shows it clearing. Xero shows the same information in its bank reconciliation report, letting a bookkeeper filter for checks still outstanding at any given date.
Common mistakes
- Assuming the bank balance alone shows available cash, which ignores outstanding checks already subtracted in the books and can lead to overspending against money that is not really free.
- Letting a stale outstanding check sit unresolved for years instead of voiding and reissuing it, which risks running into state unclaimed-property escheatment rules.
- Reissuing a replacement check without first stopping payment or confirming the original was never cashed, which can result in honoring the same payment twice.
Why it matters
Outstanding checks are the main reason a bank balance and a book balance rarely match on any given day, and an owner who reads the bank balance as spendable cash can overcommit funds that are promised to a vendor. For a business with many checks in circulation, tracking which ones stay open too long also protects against fraud and keeps the company out of state escheatment trouble over unclaimed funds.
Related terms
How LedgerBPO handles outstanding check
As part of monthly bank reconciliation, we track every outstanding check and follow up when one sits uncashed too long. This keeps your cash position accurate and flags stale checks before they turn into an escheatment or fraud issue.