Exception Items in Banking: Definition, Handling, and Automation

Exception items are transactions in the banking sector that face hindrances in their processing, resulting in incomplete processing. These hindrances vary from simple errors like typos or missing signatures to more complex issues such as stop payments or bounced checks. For instance, when a check lacks sufficient funds (NSF) in the payer’s account, it becomes an exception item.

Stop payments are initiated by account holders to halt the processing of specific checks. This request involves providing detailed information about the check, including its number, payee, and date, to the bank. Once flagged, the bank prevents the check from clearing. Some institutions offer options to extend or renew stop payments, particularly if the check cannot be located within a specified timeframe.

Issuing a stop payment typically incurs a nominal fee, usually around $30, although fees may vary among financial institutions. Account holders may request stop payments for various reasons, including errors in the amount or canceling a transaction after mailing the check. However, there are instances where a financial institution may be unable to honor a stop payment request.

In recent years, many companies have adopted automation to streamline the handling of exception items. For instance, Blackline offers a Finance Controls and Automation platform delivered securely via the cloud, enabling organizations to centralize and secure their accounting and finance processes efficiently.

Similarly, Digital Check has developed Special Document Handling (SDH), a specialized process for managing recurring exception items. SDH identifies exception items using routing/transit numbers or account numbers, applying specific threshold settings to ensure image quality during analysis. This process involves removing background images while preserving essential information like the payee and signature.

Banks return checks as exception items when they encounter issues such as insufficient funds, closed accounts, or incomplete information.

If a stop payment request cannot be honored by the financial institution, the check may still be processed, and the funds deducted from the payer’s account.

Yes, some banks offer options to extend or renew stop payments, particularly if the original request expires or the check cannot be located within a specified timeframe.