Why do old checks matter?
An outstanding check is cash the books say is gone and the bank says is still there. A few days of that is normal. After months, one of three things is true: the check was lost, the payee was paid another way, or the payee simply never deposited it.
Until you know which, the cash balance in the books may be understated, and the reconciliation carries the item forward every month.
Step 1: list them
From the last reconciliation, list every check that is still outstanding and is more than about 60 days old. Note the check number, date, payee and amount.
Step 2: find out what happened to each one
- Paid another way. The vendor was later paid by card or transfer. The check is a duplicate payment that never happened.
- Lost or never received. The payee will tell you. Stop the check with the bank if needed, and reissue it.
- Never deposited. The payee still has it or cannot be reached.
Do not void a check only because it is old. Ask first.
Step 3: record the void in the current period
For a check that will never clear, the entry in the open period is:
| Account | Debit | Credit |
|---|---|---|
| Cash | 450.00 | |
| Original expense account | 450.00 |
If the money is still owed to the payee, credit a liability to that payee instead of the expense. If you reissue the check, the new check is a new payment.
The date is today’s date, not the original date. The original period stays as it was.
Step 4: check unclaimed property rules
If the money is owed and cannot be delivered, for example an uncashed paycheck or a vendor that has disappeared, it does not become yours. States have unclaimed property rules that require reporting and handing over such amounts after a waiting period. The periods and the rules differ by state and by type of payment, so check your own state’s unclaimed property office.
How do I stop the list from growing?
Review outstanding checks every month, not once a year. A check that is 45 days old is one phone call. A check that is two years old is a research project.
In LedgerDock the Checks screen lists the checks that are still outstanding, so the list is in front of you during the close. See the Checks tutorial.