Best Practice for Blank Checks

We occasionally use handwritten blank checks (e.g. for permits where you don't know the amount until you're in the permit office) and I'm looking for best practices, info on how others keep track of blank checks, and if there are pros / cons to our current process. 

Our current process:

  1. Pull physical check from the printer and write in payee information, date, and check number matching stock check number
  2. AP > Tasks > Record Manual/Print Quick Checks...
  3. Enter check number of blank check and leave amount blank / enter $0, create invoice with coding for check
  4. Send positive pay info to bank with check as $0
  5. Once check is used, void check, delete invoice, and delete the check
  6. AP > Tasks > Record Manual/Print Quick Check...
  7. Enter all the same info for check and invoice, but with correct amount
  8. Send positive pay info to the bank with updated check amount

Specifically wondering if since we have positive pay set up with our bank, is it necessary to do steps 2 through 5? Is there a downside to doing these steps? We also seem to be having some issues with manually recorded checks not updating the accounts payable balance in GL so am wondering if something in our process sounds incorrect.

Or does someone have a different process?

  • Manual checks usually post to General Ledger accounts as a debit to the Expense account and a credit to the Cash account. They don't pass through the Accounts Payable account. If you skip steps 2-5, you would have to otherwise keep track of the blank check so you could follow up by entering the manual check information once it is known. Beside the checks we run through our printer, we also have an old-fashioned checkbook with a check register built in. We use the old-fashioned checks for the blank checks and this is how we keep track of blank checks until we have the amount. On the built-in check register we pencil in who has the blank check so we can follow-up with them if a receipt isn't turned in after a reasonable amount of time. Once the receipt is turned in, we record the amount in the old-fashioned built-in check register. We then record these old-fashioned checks as manual checks in AP. The old-fashioned checks are numbered differently than the printer's checks so we don't run into the problem of duplicate check numbers.
  • Thanks for sharing your process! I also appreciate the info about how manual checks post to GL. It has been difficult to find information on this. It does seem that some of our manual checks pass through the AP account and some don't, are you familiar with what the pattern of this is? Also, does this mean that when we record a manual check, we need to do something in GL to make sure that the AP account updates to reflect the correct balance?

    Thanks again!
  • The invoices that were entered through "Enter Invoices" pass through your AP account by debiting the expense account and crediting AP. When you pay an "Entered Invoice" (through a manual check by listing and choosing to pay an invoice that has already been entered) (or through Select Invoices to pay and Print Checks), the process will Debit AP and Credit Cash. In this example, the amounts are shown in the AP account as a credit when you entered the invoice and then a debit to AP when you pay the invoice, thus zeroing out the AP account once the invoice has been entered and paid; leaving balance changing entries for the Expense account as a debit and the Cash account as a credit.

    If you enter the invoice (in the distribution area) while in "Record Manual Checks", the invoice does not pass through the AP account. Instead, it Debits Expense and Credits Cash (and notice this is the end result in the paragraph above). Remember AP is a liability. AP is an amount of what you owe and once something is paid, you don't owe it anymore. So the software, which understands this, means that you don't need to do anything to General Ledger as it is automatically done for you. If you look at the printout for your process of Record Manual checks, the General Ledger Recap at the end is what really is going on in General Ledger when you record manual checks.

  • That was very helpful! Thanks so much for the explanation.