What do you do with those checks that never clear in your QuickBooks Bank Rec?
 

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QuickBooks Bank Reconciliations

 

 

   Uncleared Checks - can you simply delete them?

 

A really big part of preparing a bank reconciliation is dealing with items that should have cleared but still remain uncleared.  These items are distorting your current balance in your checking account and the net profit and loss of your business.

Voiding or deleting a check will cause your bank balance and balance sheet/ profit & loss to change FOR THE PERIOD the check was written in.  That is not a good thing.  If you have delivered reports to the business owner, board of directors, your bank or other outside party, you do not want to have to explain why the net income or balance sheet has changed. It simply does not make you look good! in fact, an unsophisticated reader of the financial statement could unreasonably worry that you may not know what you are doing.  

A better alternative is creating a journal entry in the current month and then clearing the check and the journal entry on your next QuickBooks bank reconciliation - here are the steps:

  1. Open the original check - on the memo lines (both) write "this check voided xx/xx/xxxx and replaced with check xxxx
  2. Create a journal entry to Debit the bank account and credit the expense the original check was posted to (if the check was a bill payment check - post the journal entry to the account used on the bill.
    Journal entries can be found under the company menu.
  3. Enter a new check transaction and print- post to the account used on the Credit side of the journal entry in #2 above, in the memo field - replaces check XXXX orig dated xx/xx/xxxx

WARNING- Your state government wants you to treat uncleared checks as  unclaimed property, turning the money over to them!!  That's right- the technical term is called escheatment and if the state were audit your company - an auditor may ask for a list of voided checks.  If you void checks, keep the voided paper check with your tax documents (or scan it), if a transaction was voided in QuickBooks - keep documentation in the folder with the paper voided checks (if available) as to the story behind the voided check..

Step one: Determine why the check is uncleared

A.  Is this uncleared item a duplicate entry? 

Edit menu > Find > Advanced > Click on the filter for amount and search QuickBooks to see if indeed this is a duplicate entry which can be deemed "erroneous-entered in error"

Click the reset button on the find window
Edit menu > Find > Advanced > Click on the filter for name and enter the name of the payee on the check and search through the transactions to determine if the payment was included on another check that was issued and cashed.

B. Is this uncleared item for a service or product that was never rendered or delivered?

C. Did the payee on the check die, move away to an unknown address, or lost the check?

D. Did the bank make an error - clearing the check for the payee but never or did the bank make?

Step two: Decide the best way to remove the transaction from QuickBooks since it will never clear.

i. If the check did not clear due to C or D above ( in other words, the payee was entitled to clear the
   check)

Search the internet for escheatment rules in your state on the
keywords "Your State + Reporting unclaimed property + holder packet" . You should find a website that will provide instructions on how to submit the funds to your state as unclaimed property.

To avoid dealing with this extra layer of bureaucracy, when a check remains uncleared for two consecutive months, call the payee to find out why.  If you need to reissue the check, and do not want to change the books and records follow steps 1-3 above to replace the check.  Another option would be to mark that same check "to be printed" again.  And reprint with a new check number, leaving the date in the same period.  In your voided check folder, write down on a piece of paper the original check number, payee and date - and put a reason for the void "payee never received - reissued with check number xxxx"

ii. If the check did not clear due to A or B above - a replacement check is not necessary. 

Make a journal entry - Company Menu> Make Journal entry
Debit the bank account
Credit Expense account used on the original transaction ( if the original transaction was a bill payment, use the expense account on the bill being paid)

     


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