Banking
Post-dated cheques (PDC) and bounced cheques: how to track and account for them
How to record, track and follow up post-dated cheques and bounced cheques in a Bangladeshi business, with clear accounting entries and control habits.
Cheques remain a major way of settling B2B trade in Bangladesh, and post-dated cheques are the usual way customers pay on credit terms: here is a cheque dated 30 days from now. For the seller, a drawer full of PDCs feels like money in hand. It is not. It is a promise with a date on it, and some promises bounce.
This article covers how to track cheques received and issued, how to account for them at each stage, and how to handle a bounce. It deals with accounting and control; the legal consequences of a dishonoured cheque are a matter for a lawyer.
The life of a received cheque
Every cheque you receive passes through stages. If your system only knows about receipts, you lose sight of where the cheque is and whether the money is yours yet.
| Stage | Meaning | Cash position |
|---|---|---|
| Received (PDC in hand) | Cheque in your possession, date not yet reached | Not cash. Customer invoice should be tracked as covered by a cheque, not as paid |
| Deposited | Lodged with your bank on or after its date | Not yet cash. Awaiting clearing |
| Cleared | Bank has credited your account | Cash received |
| Bounced | Bank returned it unpaid | Debt reinstated and follow-up begins |
Recording a received cheque
When a customer hands you a cheque, record it immediately with the customer, invoice(s) covered, cheque number, bank and branch, amount, cheque date and receipt date. Do not treat it as a bank receipt until it clears. A common and clean approach is to post it to a cheques-in-hand account on receipt, and move it to the bank when deposited and cleared.
- On receipt: debit cheques in hand, credit the customer (the invoice stays tied to the cheque)
- On deposit: move the cheque to cheques deposited or to the bank clearing account
- On clearing: debit the bank, credit cheques in hand or clearing
- On bounce: reverse the receipt so the invoice is open again and the customer balance is restored
The eSolverBooks banking section has a Cheques & PDC workspace for this: you receive a cheque or PDC, track it through deposit and clearing, and handle bounces, with totals showing PDCs in hand that are received and not yet deposited, and bounced amounts. The point of any such tool is the same: the cheque has a status, and the invoice follows it.
Diary the dates
A PDC is only useful if it is presented on time. Review upcoming cheque dates weekly: which cheques become depositable this week, which are close to going stale, and which belong to customers you are worried about. Cheques normally have a validity period after their date, set by banking rules and practice, so do not leave them sitting in a drawer indefinitely. Confirm the current rule with your bank.
When a cheque bounces
- 1Get the bank's return memo and note the stated reason. Insufficient funds, signature mismatch and account closed each call for different responses.
- 2Reverse the receipt in your books the same day, so the customer's balance and your aging are correct.
- 3Record any bank charges for the returned cheque. Decide whether to recover them from the customer and bill them separately if so.
- 4Contact the customer straight away and agree on a replacement payment: cash, bank transfer or a new cheque.
- 5Place the account on hold for new credit until it is settled, and tell the sales team.
- 6Record every step and keep the original cheque and bank memo safe.
Cheques you issue
The same discipline applies to cheques you write. A cheque issued to a supplier reduces your payable when it is issued, but the money stays in your bank account until it is presented. Your bank balance in the books will therefore differ from the bank statement by the cheques issued and not yet cleared. That difference is a normal reconciling item, but only if you list it. Track each issued cheque with number, payee, amount and date, mark it cleared when it appears on the statement, and review the uncleared list monthly. Cheques stuck for months should be investigated: lost, stale or disputed.
Post-dated cheques you issue
If you give a supplier a PDC, you have committed cash for a future date. Keep a schedule of PDCs issued by date so the finance team knows how much must be in the bank on each day. The most common cause of an issued cheque bouncing is not bad faith. It is that no one added up the cheques due that week.
Controls worth having
- Cheques received are logged on the day, by someone other than the person who deposits them, where staffing allows
- Blank cheque books are locked away, issued cheques are numbered and every number accounted for, including spoiled ones
- Cheque printing or signing requires approval from the authorised signatories, with amounts matching an approved payment
- A weekly report of PDCs by date for both received and issued
- Bounced cheques reviewed by the owner or finance head every month
A cheque is a piece of paper that moves money only when a bank says so. Keep your records as honest as the bank's: status by status, date by date, and nothing treated as cash until it is.