How do I deal with cheques before they are cleared?

[Katieq]

When we receive payment by cheque, do I need to make an entry in our books (Quickbooks) to show that the cheque has been received? Sometimes it will take days for the cheque to clear into the bank account. At present I have a "cheques received but not cleared" account in Quickbooks, receive the cheque into that account and then transfer it to the bank account when it is cleared. Is this OK?

I'm also not sure what to do about foreign cheques. Obviously the exchange rate when the cheque is received (and therefore entered into the "cheques received but not cleared" account) will be different from the exchange rate when the cheque is cleared. Do I need to acknowledge this subsequent difference in the sterling rates in my accounts? If so, how?

Thankyou you clever people out there!

Kateiq

 

[Truemanbrown]

With regard to the receipt of cheques into the bank account, I would post the cheque into Quickbooks on the day of receipts. There is no real need for the accounts 'Cheques received but not cleared account'. The fact that the cheque may or may not clear will become apparent when you do the bank reconciliation.

As for foreign cheques, again I would post the cheque into the system using the exchange rate occuring on the date of receipt.

 

[Katieq]

Thanks Truemanbrown.

Trouble is I can't receive foreign cheques into our (sterling) bank account until I know what the exchange rate is that has been used to deposit it into the account. This is usually a matter of at least several days and sometimes weeks after the cheque is received and taken to the bank. Therefore the cheque is sitting in no-mans-land for that time. If I use the exchange rate from the day of receipt, when it comes to clearing, the exchange rate is bound to be different and therefore the sterling amount will be different. I'm just not sure where they should be recorded when they're received but not in our bank account.

 

[stugster]

As long as they're recorded, it's not a big issue. Your VAT point is most likely when the invoice is raised anyway.

I personally mark them paid as soon as I deposit them in our account (They show up straight away in the balance, just not in the available balance).

 

[Truemanbrown]

Thanks Truemanbrown.

Trouble is I can't receive foreign cheques into our (sterling) bank account until I know what the exchange rate is that has been used to deposit it into the account. This is usually a matter of at least several days and sometimes weeks after the cheque is received and taken to the bank. Therefore the cheque is sitting in no-mans-land for that time. If I use the exchange rate from the day of receipt, when it comes to clearing, the exchange rate is bound to be different and therefore the sterling amount will be different. I'm just not sure where they should be recorded when they're received but not in our bank account.

There is nothing stopping you putting the cheques through using the exchange rate occurring on the date of receipt and then amending the entry once you have confirmation of the actual sterling amount posted into the bank account.