What are Outstanding Checks?
Outstanding checks are a result of a time delay between a business writing out a check to pay a supplier, and the check being cleared through the bank account of the business.
The reason for this delay is the time it takes the check to get to the supplier, the supplier to send the check to its bank, the suppliers bank to process and send the check to the bank of the business, and finally for the check to clear the account of the business.
While these checks are in the system they are referred to by the business as outstanding checks. As the outstanding checks have been posted into the cash book but have not yet cleared the bank statement, they form a key component of any bank reconciliation procedure.
It is important for the business to keep track of outstanding checks using the bank reconciliation, as sufficient funds must be maintained in the bank account to cover the outstanding checks as and when they are presented for payment.
For further information see the Wikipedia definition.
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