How To Handle Outstanding Items

When you work on your bank reconciliation, do you notice the same outstanding items keep appearing month after month? Before you start reconciling this month, take a moment to carefully review those old transactions and determine the appropriate action to take. 

Start by researching the outstanding items, and see if a duplicate entry (deposits or payments) was recorded in your accounting system. This may happen if the amount cleared and the amount paid was slightly off or a check was lost in the mail, and the original check was never voided. If you discover a duplicate entry, you will need to reverse the transaction to clear the item from the bank reconciliation. Three common ways to reverse a transaction are voiding it, creating a credit memo, or creating a Journal entry. When voiding a check, you should verify the original check was written during the current accounting period. Voids in prior years will cause your balance sheet to be incorrect. If you need to void a check from a previous year, create a journal entry or credit memo dated the current year and apply it to the outstanding item.

If you have determined that the outstanding item is valid, the next step is to contact the payee (vendor or employee) of the outstanding check to discuss why the check has not been deposited. Any attempts at contacting the payee must be documented in writing and include the date, time of contact, and what was discussed. 

When all efforts to correct the issue with the vendor or employee have been exhausted, the property (monies) must be reported to your state’s Unclaimed Property Program. In Texas, unclaimed property is defined as any financial asset that has been abandoned by the owner (payee) for periods ranging from one to fifteen years. This abandonment period is the number of years that the property is held before being sent to the Texas Comptroller of Public Accounts. The type of unclaimed property determines how long the abandonment period should be. One of the most common types of unclaimed property is wages, payroll, or salary, which have an abandonment period of one year. Commissions, customer overpayments, or vendor payments have three years.

Dormancy is determined by the last contact date or owner-initiated activity. If no contact with the owner has occurred during the abandonment period, you must notify any owners of checks valued at over $250.00. Mail the notice to the owner’s last known address no later than May 1, stating that you are holding the property and may be required to turn over the property to the Comptroller on or before July 1 if they do not claim the property. If the notice is returned to you by the Post Office, you are not required to send another notice. You may reduce the amount owed to the missing owner for the postage costs. House Bill 1514, enacted on May 18, 2021, now allows holders to send the notice by mail or email.

Businesses (except for life insurance companies) that, on March 1, hold property that is presumed abandoned are required to file a report of that property with the Texas Comptroller on or before July 1 the following year. The report year is for the 12-month abandonment period from March 2 through March 1. Businesses that have filed a report in the past are required to continue to file annually, even if there is no new abandoned property to report. Property reports are submitted online at ClaimItTexas.org.  Payment of unclaimed property can be made with either a check payable to the Texas Comptroller of Public Accounts or by ACH through the State of Texas Financial Network, TEXNET. 

To adjust your books for the checks sent to the Comptroller, record a journal entry debiting the bank account and crediting Accounts Payable for each item submitted, then clear the outstanding items and the journal entry on the subsequent bank reconciliation.

Unclaimed property records are maintained for10 years after reporting them to the Comptroller’s office. Please get in touch with ATKG if you need assistance in dealing with unclaimed property. 

Source Credits: © 2021 Thomson Reuters