Post Dated Check

Post-dated check is a negotiable instrument that the payer writes for a specific future date before which the drawee cannot produce the same in the bank to get the desired amount.   Whether check can be cashed or  deposited before the mentioned date solely depends on the country.

It simply means that the payer is committed to making the payment only on a future date. Post-dating makes sense only when the payer is specific that the payee will not encash the check or deposit it in the bank before the date appearing on the check. The main intention of this check remains a deliberate payment delay.

• Post dated check is an instrument with a future date and is negotiable. Simply put, a post-date check will be processed in the future. 
• It has rules such as no fraud allowed; it is not a written agreement, and bank confirmation is essential.
• It functions as an installment payment system, allowing the payer to postpone paying the complete total at once or on the due date. In addition, it serves as a guarantee for both parties that the transaction will take place at a later time.
• The process of writing a post dated check is the same as writing a regular or standard check. The only distinction in writing a post-dated check is that the present date is replaced with a future one.

Post dated check is drawn with a date mentioned on it that is in the future. This type of arrangement is only made if the drawer wants to make payment at a particular date in the future. Thus, the check can be deposited only on or after the mentioned date. A post dated check validity is normally 3 months but may vary with the rules and regulations of a country.

Similarly, whether the check may be encashed before the mentioned date or not, also depends on the banking regulations of that country.

A Canadian bank, for example, cannot process a post-dated check before the mentioned date, and if it does, it is treated as an error, and the bank must rectify the transaction. In the US and UK, a post dated check can be drawn at any time and the date mentioned has no value, whereas, in India and Australia, post-dated checks cannot be paid until the date written on the check has been fulfilled.

It is important to know the basic rules and how to issue post dated check.

#1 – No Fraud is Allowed

Though no law makes post-dated checks illegal, it is unlawful to issue a check when the payer doesn’t have enough funds to cover the amount mentioned in the check, leading to a post dated check bounce. This is extremely important if the drawee wants to cash post dated check.

#2 – Not a Written Agreement

The payee can present the check at any time unless and until the payer mentions to the bank that the check cannot be encashed before the specified date. This is applicable for countries like the US and UK where if required, the payee can present the check at any point in time, and if there is no instruction from the payer to the bank; the bank must honor the check, which means the bank is free to pay the funds to the payee even before the date mentioned. However, such scenarios are not present in India and Australia, where banks are required to encash the check only on and after the specified date.

#3 – Confirm with Your Bank

When a future-dated check is written, it guarantees nothing. One must provide written instructions to the bank, and the bank can tell exactly how to do it. Furthermore, different banks have different rules on how long they will continue to track to prevent premature payments, which are again dependent on the user paying certain fees for this monitoring.

US national banks can encash checks before the date mentioned on the check leaf. According to US Banking laws, a check is a negotiable instrument, and a payee has the right to negotiate it through the banking system at any point in time. Thus, the date mentioned in it bears very little importance unless the payer has provided some written instruction to the bank about not providing the chance of getting the check encashed before the mentioned date.

In the UK, too post-dating, a check carries no legal weight, and the bank can encash it at any point. A check is defined as a bill of exchange drawn on a banker payable on demand in UK banking laws. Under the Bill of Exchange and Banking Act 1882, a bill is not invalid only because it is post-dated or ante-dated. The rules regarding post dated check validity also state that it is valid for three months.

It is necessary to know how to fill post dated checks. Such a check is a negotiable instrument with a future date written on it. So, for example, if today’s date is 19th June 2020 and the drawer wants to issue a check where they need the payee to receive the amount after a month, they will put the date as 19th July 2020 where the check can only be cashed or deposited in the bank on and after 19th July 2020.

When the drawee has to cash post dated check, they should always ensure that one has enough funds to honor the check on the specified mentioned date and that there is no post dated check bounced.

These will again lead to the payment of insufficient fund fees or overdraft fees which the bank will collect as a penalty from the check issuer or the payer. Banks in the US and UK will not need to check the check date unless the issuer has typically mentioned not to release the payment before the said date. In contrast, this is different in India and Australia, and banks will only encash the check if the date mentioned in the check has been fulfilled.

Let us understand the concept with an example.

XYZ Ltd. is a private company dealing in computer accessories manufacturing. The company must purchase different components as raw materials to assemble them as the final product. The company is a bit short of cash and will soon pay its customers as the cash collection begins in a month. On the other hand, the company needs to purchase certain raw materials from its suppliers to let the production cycle run as usual without any impact. Thus, the company buys raw materials from its suppliers for $10,000 and makes the payment in two post-dated checks of $5,000 each. The date mentioned in the first check is one month from now on, and the date in the other is two months from the current date. The supplier agrees to hold the check and only present them on the given dates with the commitment from the business that both checks will be honored and paid by the bank on the specific dates. Thus, the supplier should not debit cash and credit account receivables on the date the supplier received the check. This is because a post dated check cannot be considered cash before the date mentioned in the check, and only on the date mentioned in the check leaf can one treat it as cash and deposit the same in the bank.

The diagram given below gives an idea of how a post dated check will look like. As per the diagram, the check was issued on 25/01/2023, but on the check, the date given is 25/04/2023, which is after three months. Thus it is clear that this kind of check will have a future date mentioned on it. It can be encashed on or before that date, depending on the banking rules of the country.

A post dated check has a future date on it, whereas a stale check is an expired check with pending encashment. However, the basic differences between them are as follows:

This article has been a guide to Post Dated Check and its meaning. Here we explain the rules to follow along with a sample check and example to see how to write it. You can learn more about accounting from the following articles –

• Bank Draft vs Certified Cheque
• Backdating
• Round Tripping
• Account Balance