What are the outstanding checks?
If there are a check and a situation where the recipient fails or forgets to deposit, those checks are called Outstanding checks. Those types of checks can create huge accounting problems, and those types of checks, if never cashed, are considered 'unclaimed checks' and remain there as an asset to the state.
What are the effects of outstanding checks?
In a scenario where a person pays another person using checks, the check received person or can say the payee is supposed to deposit the same check in the particular account. Once this check deposited in the payee’s bank, the check will move to your account, and the same amount will deduct from your account. The entire transaction circle will come to an end if and only if this circle gets completed. If you and your payee belong to the same bank, there is only a matter of transferring cash from your account to the payees.
If the check not presented by the payee or destroyed in any manner, the transaction circle fails in between, and the money remains in the payer’s account. Accountants say that these types of checks, otherwise known as outstanding checks, are trouble-making as far as accounting entries are concerned.
Role of an accounting firm
Accounting firms should have to keep an eye on the accessed checks and avoid unclaimed checks and other sorts of property. If the checks given to the employees or vendors remain without cashing, these checks may evolve as assets to the state in the future. Here comes the role of an accounting firm, and the first thing that they have to track is the income and the expense, and also, they should have an eye on accounts payable.
Steps to be taken to manage outstanding checks
The first step to manage this situation is to be pro-active regarding outstanding checks. The money that you have is payable to the payee at a point in time, maybe in the future. One should be very attentive towards uncashed checks, which may hit the account with a significant impact in the future.
Another step that can do is to call the payee and can ask him to deposit the check received. Mailing the person or writing letters to the payee regarding depositing the check will be a good solution.
Any need for writing checks in this condition?
There is another solution for outstanding checks, and that can be the issuance of another fresh check. In that condition, make sure that the old check is returned or else there is a chance that the payee can unintentionally deposit both checks. This situation, if not well managed, may end up in double payment.
In any case, if the checks that have issued are causing enough headaches such as those mentioned above, there is an option that the payee can go for a check stoppage, and the check will not be cash further.
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