Money Matters

What are outstanding checks in bank reconciliation? How to identify, calculate, and manage them

Outstanding checks can make your bank statement show more cash than your business has already committed. Learn how to identify, calculate, record, and manage them during bank reconciliation.

Published September 24, 20267 min read Share

This article was originally published on June 13, 2025 but has been refreshed and re-published with new content in September 2026.

At month-end, uncleared checks can make your bank statement show more cash than your business has already committed.

If that difference is missed, cash forecasts and period-end reporting can start from the wrong number.

For business owners and finance teams, those figures can influence decisions about hiring and bonuses, planning for upcoming tax payments, and the financial information you present to lenders or investors.

Accounting for outstanding checks helps you work from an accurate cash balance instead of relying on the bank statement alone.

Key takeaways

• An outstanding check is a payment your business has issued and recorded that has not yet cleared the bank.
• When preparing a bank reconciliation, outstanding checks are normally subtracted from the bank statement balance.
• To calculate outstanding checks, compare issued checks with cleared bank transactions and add the amounts that have not cleared.
• Older unresolved checks may need follow-up, but a check does not automatically become invalid when it reaches six months.

Here’s what we’ll cover:

What are outstanding checks in bank reconciliation?

Outstanding checks are checks that your business has issued and recorded in its accounting records but that have not yet cleared the bank.

Until the recipient deposits or cashes the check, your books reflect the payment while your bank statement does not.

This is a normal timing difference.

When preparing a bank reconciliation, outstanding checks are normally deducted from the bank statement ending balance to account for payments already recorded by the business.

Why outstanding checks matter

Outstanding checks are not automatically a sign that something is wrong, but problems arise when you forget to account for them or leave unresolved checks without review. This can result in inaccurate cash planning, reporting, and payment problems.

Accounting for outstanding checks helps you:

• Plan cash more accurately. When money you have already committed to a payment still appears in your bank account, it’s easy to spend money you don’t actually have.
• Support accurate period-end reporting. Missing outstanding checks from the reconciliation can leave your adjusted bank balance incorrect.
• Avoid payment problems. Spending funds already committed to an outstanding check could contribute to an overdraft or a Non-Sufficient Funds (NSF) situation when the check is cashed.
• Review unresolved payments. An aging check may signal that the payee has not received it, which may need follow-up.

How to record, identify, and calculate outstanding checks

To find outstanding checks, start with the checks your business has issued and compare them with the transactions that have cleared the bank.

The same process applies whether you reconcile your own books or prepare a bank reconciliation for a client:

1. Record checks when you issue them.
2. Compare your records with your bank statement.
3. Identify uncleared checks.
4. Add up their amounts.
5. Subtract the total from the bank statement balance.

1. Record a check correctly when you issue it

Enter the payment in your accounting records when the check is issued rather than waiting for it to clear.

Keep enough information to identify the transaction later, including:

• Check number
• Issue date
• Payee
• Amount

2. Compare your records with the bank statement

Match the checks in your register or accounting system against the checks that cleared during the reconciliation period.

A check in your records that does not appear as cleared on the bank statement may be outstanding.

Verify the transaction before treating it as outstanding in case the difference results from another recording or bank error.

3. Calculate your outstanding checks

To calculate outstanding checks in bank reconciliation, add up the value of every issued check that remains uncleared at the reconciliation date.

For example, if three outstanding checks are for $400, $650 and $950:

$400 + $650 + $950 = $2,000 in outstanding checks

That $2,000 becomes a reconciling item on the bank side.

4. Subtract the total from the bank statement balance

Deduct the total outstanding checks from the bank statement balance.

Other reconciling items, such as deposits in transit, bank errors, or book-side adjustments, are handled separately as part of the full reconciliation.

Example of outstanding checks in bank reconciliation

Suppose your bank statement shows an ending balance of $25,000, but two checks recorded in your accounting system have not cleared:

Reconciliation item	Amount
Bank statement ending balance	$25,000
Outstanding check #1048	($1,200)
Outstanding check #1053	($750)
Total outstanding checks	($1,950)
Adjusted bank balance	$23,050

Assuming there are no other bank-side reconciling items, subtracting the $1,950 in outstanding checks brings the bank-side balance to $23,050.

How to handle outstanding checks that have not cleared

Keep an outstanding check under review until it clears or you resolve the payment.

The right response depends on what happened to the check, not just how long it has been outstanding for.

Situation	What to do
The check was issued recently and is still expected to clear.	Keep it on your outstanding check records. If an unexpected delay occurs, contact the payee to confirm they received it.
The payee reports the check lost or missing.	Follow your bank and internal procedures for stopping or voiding the original check before issuing a replacement. Do not simply issue a duplicate while the original could still clear.
The check is more than six months old.	Investigate the payment and contact the payee. Do not assume the check is automatically invalid. Follow your bank procedures and accounting policies before voiding or replacing it.

What happens when an outstanding check is more than six months old?

A check that has been outstanding for more than six months may be considered stale, but six months is not an automatic expiration date.

The bank may still pay the check in good faith.

If an older check remains unresolved, confirm whether the payment is still owed, contact the payee, and follow your bank and company procedures for replacing it.

Use bank reconciliation software to reduce manual work

When transaction volume increases, comparing every bank transaction manually can take time.

Accounting software can help keep accounting records and bank activity together, while bank reconciliation software can automate parts of the matching process.

Sage bank reconciliation software supports capabilities such as:

• Importing bank and credit card transactions.
• Matching bank activity against accounting records.
• Applying rules to transactions with consistent patterns.
• Identifying variances and exceptions for review.

These tools can reduce repetitive reconciliation work, but outstanding items still need review when the reason for the difference is unclear.

Explore accounting software from Sage to compare options for your business.

Frequently asked questions

Do outstanding checks require a journal entry?

An outstanding check does not require a journal entry if the check was correctly recorded when it was issued and remains valid. Its outstanding status is a bank-side timing difference, so no additional journal entry is normally needed. If you later void the check or correct the original transaction, an accounting entry may be required.

What happens to outstanding checks from the previous month?

If a previous month’s outstanding check is still valid and has not cleared, it remains on the current reconciliation as a deduction from the bank statement balance. Once it clears or is otherwise properly resolved, remove it from the outstanding check list.

What is the difference between an outstanding check and a deposit in transit?

An outstanding check is a payment recorded by your business that has not yet cleared the bank. A deposit in transit is money your business has recorded as received but that has not yet appeared on the bank statement. In a common bank-side reconciliation, outstanding checks are deducted while deposits in transit are added.

Can outstanding checks become unclaimed property?

Long-unclaimed payments can be subject to state unclaimed property rules. Requirements and dormancy periods vary by state and payment type, so check the applicable rules before writing off or otherwise disposing of an old, outstanding amount.

How often should you review outstanding checks?

Review outstanding checks as part of each regular bank reconciliation. The appropriate frequency depends on your transaction volume and internal controls. Smaller businesses with fewer transactions might only need a monthly reconciliation, while weekly or even daily reconciliation could be needed as your business grows and transaction complexity increases. Bear in mind that unusual, older, or higher-value items may need attention before the next scheduled reconciliation.

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