Accounting | How To

How To Use the QuickBooks Online Undeposited Funds Account

Published January 17, 2024

Published Jan 17, 2024

Tim Yoder, Ph.D., CPA

REVIEWED BY: Tim Yoder, Ph.D., CPA

Mark Calatrava

WRITTEN BY: Mark Calatrava

This article is part of a larger series on Accounting Software .

  • Put Checks and Cash Into Undeposited Funds
  • Combine Transactions With a Bank Deposit
  • Review and Manage Deposits
  • Importance of Undeposited Funds
  • When To Use Undeposited Funds

Bottom Line

When you receive cash and check payments from customers, you first place them into the Undeposited Funds account instead of directly depositing them in your actual bank account. When all checks and cash payments are entered and you’re ready to deposit them, you can take them out of the Undeposited Funds account and make a single deposit in your bank account. You can then review your deposit to see if the amount recorded matches the total fund deposited.

In this article, we’ll show you the step-by-step process of using the Undeposited Funds account in QuickBooks Online. We’ll also show you how to add and remove a payment from a deposit and how to delete an entire deposit.

Step 1: Put Checks and Cash Received Into the Undeposited Funds Account

Record the payment received from your customer and place it into the Undeposited Funds account. Use the Receive payment form when your customer pays you for an invoice and the Sales receipt form when you receive immediate payments.

You must use the Undeposited Funds account only for payments that are physically collected, including cash and paper checks. If you receive electronic payments, such as credit card and debit card payments and bank transfers, deposit them directly to your checking account since that is how they will appear separately on your bank statement.

Processing Invoice Payments

When you receive a paper check or cash for payment of an invoice, click on the + New button at the upper left portion of your QuickBooks Online dashboard and then select Receive payment , as shown below.

Screen showing how to navigate to the Receive payment screen in QuickBooks

Navigate to the Receive payment form in QuickBooks

Next, fill in the required information in the Receive payment form. To help you better understand how to complete the form, let’s use an example. Say we received a $1,700 check payment from Aaron Berhanu for a heating, ventilation, and air conditioning (HVAC) installation invoice.

Receive payment screen in QuickBooks showing fields like Customer, Payment date, and Payment method

Receive payment screen in QuickBooks

  • Customer: Select the customer who made the payment. You can choose from your list of customers (in our case, we selected Aaron Berhanu). If needed, you can add a new customer on the fly. You can check out our tutorial on how to set up customers in QuickBooks Online for detailed instructions.
  • Payment date: Enter the date the payment was received.
  • Payment method: Specify the method the customer used to make the payment, such as cash, check, or credit card. In our case, we selected “check.”
  • Reference no. (optional): Enter a unique identifier to track and reference the payment. It might be a check number or a transaction ID associated with the payment.
  • Deposit to: This field allows you to specify the account where the payment will be deposited. If the payment will be grouped with other payments and deposited in a single transaction, then select Undeposited Funds.
  • Outstanding transactions: This section displays any outstanding invoices associated with the customer, allowing you to apply the received payment to specific invoices. Mark the checkbox before the invoice that is being paid with the transaction. You can see in the image below that we marked the $1,700 invoice.
  • Amount: This reflects the total amount of the invoice payment.

Once done, click Save and close, and your received payment will automatically be reflected in the Undeposited Funds account.

For more detailed instructions, head to our tutorial on how to receive payments in QuickBooks Online .

Processing Sales Receipts

When you immediately receive a cash or a check for a sales transaction without having created an invoice, then you must use the Sales receipt form to record the check and revenue. Select + New and then click Sales receipt .

Screen showing how to navigate to the Sales receipt screen in QuickBooks

Navigate to the Sales receipt screen in QuickBooks

From the Sales receipt form, you’ll need to provide the requested details. For guidance, let’s use another example. Suppose we recently received an upfront payment of $150 in cash from Robert Allard for an A/C repair service.

Sales receipt screen in QuickBooks showing fields like customer name, email, and payment method

Sales receipt form in QuickBooks (1 of 2)

  • Customer: Select the customer for whom the sale is being recorded. You can add a new customer if needed. In this case, we selected Robert Allard.
  • Email: This field populates automatically based on the email address you entered when setting up the customer profile.
  • Billing Address: As with the email address, this field also populates automatically based on your customer profile setup.
  • Sales receipt date: Enter the date the sales receipt is made.
  • Amount: This section displays the total amount of the sales receipt, summarizing the combined total of all line items, taxes, and additional charges
  • Tracking no (optional): You can add a unique tracking number that can be used to monitor the progress of the shipment.
  • P.O. Number (optional): Enter the purchase order number for the transaction, if any.
  • Sales rep (optional): If applicable, you can associate a sales representative with the transaction by selecting their name in this field.
  • Payment method: Specify how the payment was made, such as check, cash, or credit card. In our example, we selected “cash.”
  • Reference no (optional): This is often used for additional tracking information associated with the sales receipt, such as a customer’s order number or a project code.
  • Deposit to: Similar to the Receive Payment screen, this field allows you to specify the account where the payment will be deposited. If the payment will be grouped with other payments and deposited in a single transaction, then select Undeposited Funds.

When you scroll down the Sales receipt form, you’ll see additional sections, including information about the product purchased by the customer or service rendered. Here, you can select the product or service from your list or create a new one if needed. For this, we have a detailed guide on how to set up the products and service list in QuickBooks Online .

Additionally, you can add a description of the product or service, enter the quantity and rate, and add taxes if applicable. In the screenshot below, we have indicated the details of the A/C repair service rendered, including the rate which is $150.

Lower portion of the sales receipt screen in QuickBooks where you can specify products or services rendered to the customer

Sales receipt form in QuickBooks (2 of 2)

Once you provide all the required details, click Save or Save and send on the lower part of the screen. Your payment will be recorded automatically in the Undeposited funds account.

Step 2: Combine Checks and Cash With a Bank Deposit

Using your deposit slip as a reference, combine the check and cash payments with a bank deposit. Select + New and then select Bank deposit .

Screen showing how to navigate to the Bank Deposit screen in QuickBooks

Navigate to the Bank deposit screen in QuickBooks

From the Bank deposit form, you’ll see the following fields and sections:

Bank Deposit screen in QuickBooks showing fields like account and balance

Bank deposit screen in QuickBooks (1 of 2)

  • Account: Specify the bank account into which you are depositing the funds. In the screenshot below, we used our checking account.
  • Balance: This section displays the current balance of the selected bank account.
  • Date: Specify the date on which the deposit is being made.
  • Amount: Enter the total amount of the deposit.
  • Select the payments included in this deposit: Here, you can choose the specific customer payments that are included in the deposit. Click the box before the payment item. In the image below, we are combining the payments we received from Aaron Berhanu and Robert Allard.

Your Undeposited Funds account should only contain items that are currently pending deposit. If you see old items, you need to investigate why they are still there. Perhaps you forgot to record a prior deposit or the check was lost and never deposited.

Including Additional Checks Into Your Deposit

If you have checks to deposit that didn’t come through the normal invoicing and sales receipt process, you can add those checks in the Add funds to deposit section. For instance, if you receive a $500 paper check from a partner as a capital contribution, you’ll use this section to record the details of that check, including the account (e.g., “Partner Contribution”, an equity account) and any other relevant information.

Lower part of the Bank deposit screen where you can add include additional funds like a partner contribution

Bank deposit screen in QuickBooks (2 of 2)

Verify that the total on your bank deposit screen matches the total deposit on your physical deposit slip. Once done, click Save and close or Save and new to complete the deposit.

Step 3: Review and Manage Deposits

Review your deposits to verify that the amounts recorded accurately reflect the total funds you deposited into your bank account. This will help catch errors and discrepancies and ensure a more efficient bank reconciliation. To do this, click Reports in the left menu bar and then select Deposit detail under the Sales and customers section, as shown below.

Screen showing how to create a Deposit Detail report in QuickBooks

Preparing to run a Deposit Detail report in QuickBooks

The report shows a list of all your completed bank deposits. You can select individual deposits to open more details.

Sample Deposit Detail report in QuickBooks showing details like the transaction type and customer name

Sample Deposit Detail report in QuickBooks Online

Ensure that the deposits shown in your Deposit Detail report match your bank activity exactly. If you see any discrepancies, then you will need to add or delete items, as shown in the next steps.

Removing a Payment From a Bank Deposit

If you added a payment to a deposit by mistake, you can remove that payment easily by clicking on the deposit or amount field in the deposit entry line in the Deposit Detail report. It will take you to the bank deposit screen where you can uncheck the checkbox for the payment you wish to remove, and then click Save and close . The payment will automatically go back to the Undeposited Funds account.

Removing a payment from a bank deposit in QuickBooks

Adding a Payment to a Deposit

You can add payments to your deposit slip in a similar fashion. Any undeposited payments sitting in the Undeposited Funds account will appear in the list of payments without a checkmark. Tick the checkbox to add the payment.

Deleting a Bank Deposit

If you need to delete a bank deposit, click the deposit or amount field in the Deposit Detail report and then click More at the lower part of the screen and then select Delete  as shown below.

Importance of the Undeposited Funds Account in QuickBooks

The main purpose of the Undeposited Funds account is to make bank reconciliations easier. It does this by allowing you to group cash and paper checks into a single deposit, mirroring how banks process and deposit your payments. When reviewing your transactions, it’s easier to spot discrepancies and missing deposits since your QuickBooks records align with the combined deposits on your bank statement.

When To Use the Undeposited Funds Account in QuickBooks

You will need to use the Undeposited Funds account in QuickBooks Online when depositing more than one check or a combination of cash and checks on a single deposit slip.

For instance, you run a small retail business and in a single day, you receive payments from customers in checks and cash:

  • Customer A pays with a $100 check
  • Customer B pays with $50 in cash
  • Customer C pays with a $75 check

Instead of directly recording these transactions as separate deposits into your bank account, you can use the Undeposited Funds account to record a lump sum deposit that will match your bank statement.

Frequently Asked Questions (FAQs)

What is the undeposited funds account in quickbooks.

The Undeposited Funds account in QuickBooks Online is a holding account where you temporarily record customer payments before grouping and depositing them as a lump sum into your bank account.

Do I need to set up an Undeposited Funds account?

No, as it is set up in QuickBooks Online automatically. However, if needed, you may rename it in your chart of accounts (COA).

Do I need to reconcile the Undeposited Funds account?

No, the Undeposited Funds account itself doesn’t need to be reconciled. Reconciliation is done when you move undeposited funds in QuickBooks to your actual bank account.

You just learned how to use the Undeposited Funds account in QuickBooks Online, its importance, and when to use it. If you want other free resources to learn how to better use QuickBooks for your business, check out our free QuickBooks Online tutorials .

About the Author

Mark Calatrava

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Mark Calatrava

Mark Calatrava is an accounting expert for Fit Small Business. He has covered more than 50 accounting software for small businesses and niche industries and has developed an in-depth knowledge of the important features of accounting software, including how the importance of these features vary by business. As a QuickBooks ProAdvisor, Mark has extensive knowledge of QuickBooks products, allowing him to create valuable content that educates businesses on maximizing the benefits of the software.

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How To Clear Undeposited Funds In Quickbooks Online

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Introduction

Welcome to our guide on how to clear undeposited funds in QuickBooks Online. As a small business owner or accountant, you are likely familiar with the challenge of managing cash flow and ensuring that all incoming payments are properly recorded. Undeposited funds can accumulate when you receive payments from customers but haven’t yet deposited them into your bank account.

Undeposited funds are a convenient feature in QuickBooks Online that allows you to group together multiple payments before recording a bank deposit. This gives you better control over your cash flow and streamlines your bookkeeping process. However, it’s important to regularly clear undeposited funds to ensure that your records are accurate and up to date.

In this guide, we will walk you through the steps to clear undeposited funds in QuickBooks Online. We will explain the concept of undeposited funds and why it is important to clear them. We’ll also provide you with a step-by-step process to help you confidently clear undeposited funds in your QuickBooks Online account.

Whether you are new to QuickBooks Online or looking to optimize your bookkeeping workflow, this guide will equip you with the knowledge and tools to effectively manage and clear undeposited funds. So, let’s dive in and get started on this essential task.

What are Undeposited Funds?

Undeposited funds are a temporary account in QuickBooks Online that acts as a holding account for customer payments received but not yet deposited into your bank account. When you receive a payment from a customer, QuickBooks automatically assigns it to the undeposited funds account, rather than directly to your bank account.

This feature is particularly useful if you receive multiple payments throughout the day or week and want to group them together for a single bank deposit. Instead of creating individual deposits for each payment, undeposited funds allow you to consolidate and record them together in one transaction.

Think of undeposited funds as a virtual cash register or a temporary safe where you store your customer payments until you’re ready to deposit them into your physical bank account. This helps you streamline your bookkeeping process and ensures that all your deposits and payments are accurately recorded.

By utilizing undeposited funds, you have better control over your cash flow and can easily reconcile your bank statements with your QuickBooks records. Additionally, it helps prevent errors, such as duplicate deposits, and provides a clearer picture of your available cash on hand.

It’s important to note that undeposited funds are a feature specific to QuickBooks Online. If you’re using a different accounting software, make sure to check if a similar feature exists or if you need to handle customer payments differently.

Now that we understand what undeposited funds are and why they’re useful, let’s explore why it’s crucial to clear undeposited funds in a timely manner.

Why do you need to clear Undeposited Funds?

Clearing undeposited funds is an important step in your account reconciliation process and maintaining accurate financial records in QuickBooks Online. Let’s explore a few key reasons why it’s necessary to clear undeposited funds regularly:

1. Accuracy of Financial Reports: When you clear undeposited funds, you ensure that your financial reports reflect the true state of your business. By grouping payments and recording them as bank deposits, you accurately reflect your cash inflows, preventing discrepancies between your QuickBooks records and your actual bank transactions.

2. Easy Reconciliation: Clearing undeposited funds makes it easier to reconcile your bank accounts in QuickBooks Online. When you record bank deposits, you can easily match them with the corresponding deposits in your bank statements, ensuring that your records are accurate and up to date.

3. Improved Cash Flow Management: Clearing undeposited funds allows you to have a better understanding of your available cash on hand. By recording your bank deposits in a timely manner, you can accurately track your cash flow and make informed decisions regarding your business’s financial health.

4. Minimize Errors and Duplicates: Leaving payments in undeposited funds for an extended period increases the risk of errors or duplicates. By regularly clearing undeposited funds, you reduce the chances of accidentally depositing the same payment multiple times or missing a deposit altogether.

5. Compliance with Audit Trails: Clearing undeposited funds ensures that you have a clear audit trail of all your financial transactions. This is especially important during tax season or when undergoing an audit, as it provides a transparent record of your income sources and supports accurate financial reporting.

6. Organized Bookkeeping Process: By consistently clearing undeposited funds, you maintain a more organized and efficient bookkeeping system. This allows you to easily track and manage customer payments, deposits, and any discrepancies that may arise.

By understanding the importance of clearing undeposited funds, you can maintain accurate financial records and stay on top of your business’s cash flow. Now, let’s move on to the steps to clear undeposited funds in QuickBooks Online.

How to Clear Undeposited Funds in QuickBooks Online

Clearing undeposited funds in QuickBooks Online is a straightforward process that ensures your customer payments are accurately recorded and deposited into your bank account. Follow these step-by-step instructions to clear undeposited funds:

Step 1: Understand how Undeposited Funds work

Take some time to familiarize yourself with how undeposited funds function in QuickBooks Online. This will provide you with a better understanding of the process and help you make informed decisions when clearing undeposited funds.

Step 2: Review and Organize your transactions

Before creating a new bank deposit, review your undeposited funds account and organize the transactions within it. This step ensures that all the payments you want to clear are accounted for and properly classified.

Step 3: Create a new Bank Deposit

In QuickBooks Online, navigate to the “+ New” option and select “Bank Deposit” from the drop-down menu. This will open the bank deposit form where you can begin the process of clearing undeposited funds.

Step 4: Select the payments to include in the Bank Deposit

In the bank deposit form, you will see a list of all the payments currently stored in your undeposited funds account. Select the payments you want to include in the bank deposit by checking the boxes next to them.

Step 5: Review and finalize the Bank Deposit

Double-check the selected payments and their corresponding amounts to ensure accuracy. Review any additional fields in the bank deposit form, such as payment method or reference numbers, and fill them out as needed. Once you are satisfied with the information, save the bank deposit.

Step 6: Record the Bank Deposit in QuickBooks Online

After saving the bank deposit, QuickBooks Online will create a new transaction that represents the deposit in your bank account. Review the transaction details to ensure accuracy, and make any necessary adjustments or additions. Save the transaction to record the bank deposit successfully.

Step 7: Verify that Undeposited Funds have been cleared

After completing the bank deposit, go back to your undeposited funds account to confirm that the cleared payments are no longer there. You should see a zero balance or only the remaining uncleared payments.

Following these steps will enable you to effectively clear undeposited funds in QuickBooks Online, ensuring that your customer payments are properly recorded and deposited into your bank account. Regularly performing this task will keep your financial records accurate and up to date.

Before you begin clearing undeposited funds in QuickBooks Online, it’s important to have a clear understanding of how this feature works. Undeposited funds serve as a temporary holding account for customer payments received but not yet deposited into your bank account. This feature allows you to group together multiple payments before recording a bank deposit.

When you receive a payment from a customer, QuickBooks Online automatically assigns it to the undeposited funds account instead of directly depositing it into your bank account. This offers you more control over your cash flow and simplifies your bookkeeping process.

Think of the undeposited funds account as a virtual cash register or a temporary safe where you can store customer payments until you’re ready to deposit them. This feature is especially beneficial if you receive multiple payments throughout the day or week and want to combine them into one bank deposit.

By utilizing undeposited funds, you can ensure that all your customer payments are properly recorded and matched with the corresponding bank deposits. This helps to maintain accuracy in your financial records and simplifies the reconciliation process.

When you’re ready to clear undeposited funds, you will create a new bank deposit in QuickBooks Online. This bank deposit transaction will represent the actual deposit you make in your physical bank account, and it will transfer the payments from the undeposited funds account to the appropriate bank account in your books.

Understanding how undeposited funds work in QuickBooks Online is essential to ensure that you correctly handle customer payments and maintain accurate financial records. With this knowledge as a foundation, you can confidently proceed to the next steps in clearing undeposited funds.

Step 2: Review and Organize Your Transactions

Once you have a clear understanding of undeposited funds in QuickBooks Online, the next step in clearing undeposited funds is to review and organize your transactions. This ensures that all the payments you want to clear are accounted for and properly classified before you proceed with creating a bank deposit.

Start by navigating to the undeposited funds account in QuickBooks Online. This account can typically be found in your Chart of Accounts or in the Banking section of your QuickBooks Online account.

Once you’re in the undeposited funds account, you will see a list of the payments that have been recorded but not yet deposited. Check each payment to verify its accuracy and validity. Make sure that all the payments are from customers and that they correspond to actual invoices or sales receipts.

Take this opportunity to also review any additional details associated with each payment, such as the payment method, customer name, or invoice number. This ensures that your records are complete and organized, making it easier to reconcile your accounts in the future.

If you notice any discrepancies or errors in the records, such as duplicate payments or incorrect amounts, take the necessary steps to resolve them. This may involve deleting or correcting transactions, contacting the customer for clarification, or reaching out to your accountant for guidance.

Organize your transactions by grouping them based on common criteria, such as payment dates or customer names. This can help streamline the process of selecting payments in the next step when creating the bank deposit.

By thoroughly reviewing and organizing your transactions in the undeposited funds account, you ensure that you have an accurate and complete record of the payments you intend to clear. This sets the stage for a smooth and accurate clearing process as you move on to the next steps.

Once you have reviewed and organized your transactions in the undeposited funds account, it’s time to create a new bank deposit in QuickBooks Online. This bank deposit serves as the vehicle to clear the undeposited funds and record the actual deposit into your bank account.

To create a new bank deposit, start by navigating to the “+ New” option in QuickBooks Online. From the drop-down menu, select “Bank Deposit.”

This will open the bank deposit form where you can enter the details of your deposit. On this form, you will see fields for the date, deposit to account, payment method, and reference number. Fill in these fields accurately to reflect the specific details of your deposit.

In the “Account” field, select the appropriate bank account where you will eventually deposit the funds. This should be the same account that corresponds to your actual bank statement.

Pro tip: When choosing the date for your bank deposit, select the date that matches the bank statement or the date that the actual deposit occurred. This ensures accurate reconciliation with your bank records.

If you have multiple bank accounts in QuickBooks Online, make sure to select the correct account that aligns with the undeposited funds you are clearing.

Remember, the bank deposit represents the collection of payments that you are moving from the undeposited funds account to your actual bank account, so it’s important to accurately input these details.

Take your time to review the form and double-check that all the information is accurate before moving on to the next step. Making any necessary adjustments at this stage will help avoid complications and errors during reconciliation.

Now that you have created a new bank deposit form, you’re ready to move on to the next step: selecting the payments to include in the deposit.

Step 4: Select the Payments to Include in the Bank Deposit

Now that you have created a new bank deposit form in QuickBooks Online, it’s time to select the payments that you want to include in the deposit. These payments will be moved from the undeposited funds account and recorded in the bank deposit.

In the bank deposit form, you will see a list of the payments currently stored in your undeposited funds account. Take your time to review each payment and select the ones that are ready to be deposited into your bank account.

To select a payment, check the box next to it in the bank deposit form. You can choose one or multiple payments to include in the deposit. If you have organized your transactions in Step 2, this process will be more efficient, as you can easily identify and select groups of payments based on your organization criteria.

If you come across any payments that should not be included in this particular deposit, leave them unchecked for now. These payments will remain in the undeposited funds account until you are ready to include them in a future deposit.

As you select payments, you will see the total amount accumulating at the bottom of the bank deposit form. This provides you with real-time feedback on the total funds that will be moved and recorded in the bank deposit.

If you find any discrepancies or errors in the listed payments, such as incorrect amounts or incorrectly recorded transactions, take a moment to correct them before proceeding. This will ensure that the bank deposit accurately reflects the payments you intend to deposit.

By carefully selecting the payments to include in the bank deposit, you are taking a critical step towards clearing the undeposited funds and ensuring that your funds are correctly recorded in your bank account. Once you have completed the selection process, you are ready to move on to the next step: reviewing and finalizing the bank deposit.

Step 5: Review and Finalize the Bank Deposit

After selecting the payments to include in the bank deposit, it’s crucial to review and finalize the deposit details before proceeding. This step ensures accuracy and reduces the chances of errors or discrepancies in your records.

Begin by carefully reviewing the selected payments in the bank deposit form. Double-check the payment amounts, customer names, and any associated details to verify their accuracy. This is particularly important if you have a large number of payments or if there are any complex transactions involved.

If you notice any errors or discrepancies, take the time to correct them. You can edit the individual payment details within the bank deposit form by clicking on the respective field. Make sure to save your changes after making any adjustments.

In addition to the payment details, review any additional fields in the bank deposit form, such as payment methods, reference numbers, or memo notes. Fill in any missing or relevant information that will contribute to a more comprehensive record of the deposit.

Keep in mind that the bank deposit represents the actual deposit made into your bank account, so it’s crucial to ensure that the information matches the transaction details reflected in your bank statement.

Once you are confident that all the information in the bank deposit form is accurate, you can proceed to finalize the deposit. Take a final moment to review the total deposit amount displayed at the bottom of the form, ensuring that it aligns with the total of the selected payments.

When you are satisfied with the deposit details, save the bank deposit to record it in QuickBooks Online. At this point, the selected payments will be moved from the undeposited funds account and associated with the newly recorded bank deposit transaction.

By carefully reviewing and finalizing the bank deposit, you are ensuring the accuracy and integrity of your financial records. With the deposit finalized, you can now move on to the next step: recording the bank deposit in QuickBooks Online.

Now that you have reviewed and finalized the bank deposit details, it’s time to record the deposit in QuickBooks Online. This step ensures that the funds are accurately reflected in your bank account and that your financial records are up to date.

Start by navigating to the bank deposit transaction that you just finalized. Locate the “Save” button or a similar option within the form, and click on it to save the bank deposit.

Once the bank deposit is saved, QuickBooks Online will create a new transaction to represent the actual deposit into your bank account. This transaction should reflect the details you entered when creating the bank deposit, such as the date, deposit to account, and amount.

Review the transaction details carefully to ensure their accuracy. Pay close attention to the deposit amount and the account to which it is assigned. Make any necessary adjustments or additions to the transaction to ensure it aligns with your bank statement.

For example, if you need to provide additional information or notes about the deposit, like the source of the funds, you can add those details in the memo or notes section of the transaction.

Double-check that the deposit to account in the transaction matches the appropriate bank account where the funds were actually deposited. This will facilitate accurate reconciliation with your bank records.

If you use account categories or tags in your QuickBooks Online account, make sure to assign the appropriate categories or tags to the transaction to maintain consistency and ease of reporting.

Once you are satisfied with the transaction details, save the transaction to record the bank deposit successfully in QuickBooks Online. This completes the process of moving the selected payments from the undeposited funds account to your bank account within your financial records.

By recording the bank deposit in QuickBooks Online, you are ensuring that your bank balances are accurate, and your financial records reflect the true state of your business. Now that the bank deposit is recorded, you can proceed to the final step: verifying that the undeposited funds have been cleared.

Step 7: Verify that Undeposited Funds have been Cleared

After recording the bank deposit in QuickBooks Online, it’s important to take the final step of verifying that the undeposited funds have been cleared. This ensures that all the selected payments have been appropriately moved from the undeposited funds account to the bank account, and your records are accurate.

To verify the clearance of undeposited funds, navigate back to the undeposited funds account in QuickBooks Online. You will see a list of payments and their corresponding amounts.

If all the payments were successfully included in the bank deposit and cleared, you should observe a zero or near-zero balance in the undeposited funds account.

Review the list to confirm that the payments you selected for the bank deposit no longer appear in the undeposited funds account. This indicates that the payments have been effectively moved to the bank account and are no longer part of the undeposited funds balance.

In some cases, you may encounter a situation where some payments remain uncleared or unmatched. These payments might be the result of errors, duplicates, or intentionally left out of the bank deposit. In such cases, take the necessary time to reconcile and resolve the discrepancies to ensure accurate financial records.

As you verify the clearance of undeposited funds, it’s advisable to cross-reference the cleared payments with your bank statement or transaction history. This ensures that the records in QuickBooks Online align with the actual deposits made in your bank account.

By verifying that the undeposited funds have been cleared, you can have confidence that your financial records in QuickBooks Online accurately reflect the movement of funds from the undeposited funds account to the bank account.

Congratulations! You have successfully cleared undeposited funds in QuickBooks Online, maintaining accurate financial records and streamlining your bookkeeping process. Regularly performing this task will keep your records up to date and contribute to a clear and organized financial picture of your business.

Clearing undeposited funds in QuickBooks Online is a vital task to ensure the accuracy and integrity of your financial records. By understanding how undeposited funds work and following the step-by-step process outlined in this guide, you can confidently manage and clear undeposited funds in your QuickBooks Online account.

We began by explaining what undeposited funds are and why it’s essential to clear them regularly. Undeposited funds act as a temporary holding account for customer payments, providing a streamlined approach to manage cash flow and simplify your bookkeeping process.

The seven steps we covered in this guide walk you through the entire process, from understanding how undeposited funds work to verifying the clearance of undeposited funds:

  • Understanding how undeposited funds work: Familiarize yourself with the concept of undeposited funds in QuickBooks Online.
  • Reviewing and organizing your transactions: Take the time to review and organize the payments in the undeposited funds account for accurate record-keeping.
  • Creating a new bank deposit: Generate a bank deposit form to proceed with clearing undeposited funds.
  • Selecting the payments to include in the bank deposit: Carefully choose the payments that you want to clear from the undeposited funds account and include in the bank deposit.
  • Reviewing and finalizing the bank deposit: Double-check the details of the bank deposit to ensure accuracy and make any necessary adjustments.
  • Recording the bank deposit in QuickBooks Online: Create a new transaction to represent the actual deposit in your bank account.
  • Verifying that undeposited funds have been cleared: Confirm that the selected payments are no longer in the undeposited funds account and cross-reference them with your bank statements.

Following these steps will help you maintain accurate financial records, facilitate bank reconciliation, and provide you with a clear overview of your cash flow. Regularly clearing undeposited funds in QuickBooks Online will contribute to efficient and streamlined bookkeeping, saving you time and effort in the long run.

Remember, it’s essential to regularly review, organize, and reconcile your financial records to ensure their accuracy and integrity. If you encounter any discrepancies or have specific questions, consult with a professional accountant or refer to the QuickBooks Online resources for further guidance.

With the knowledge and steps provided in this guide, you are now equipped to confidently clear undeposited funds in QuickBooks Online, giving you peace of mind and a solid foundation for effective financial management in your business.

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How to clean up undeposited funds in quickbooks online.

Undeposited funds in QuickBooks Online can cause confusion and inaccuracies in your financial records if not properly managed. In this comprehensive guide, we’ll walk you through the process of cleaning up undeposited funds in QuickBooks Online, as well as how to clear, fix, get rid of, and delete undeposited funds. We’ll also cover how to clear undeposited funds in QuickBooks Desktop and how to turn off undeposited funds in QuickBooks Online.

By following the step-by-step methods outlined in this article, you’ll gain a clear understanding of how to manage undeposited funds effectively, ensuring the accuracy of your financial data. Whether you’re a small business owner or an accounting professional, this guide will provide you with the insights and tools needed to streamline your financial processes and maintain a clean and organized accounting system.

What Are Undeposited Funds in QuickBooks Online?

Undeposited funds in QuickBooks Online refer to payments received by a company that have not yet been deposited into the bank account.

These funds serve as a temporary holding account and allow for grouping multiple payments together before depositing them into the designated bank account. This process streamlines the bank reconciliation process and ensures that the company’s financial records accurately reflect the transactions.

Recording undeposited funds appropriately is crucial for maintaining transparency and accuracy in financial reporting. By managing undeposited funds effectively, businesses can gain a clear picture of their cash flow, reduce errors, and maintain a precise record of their financial activities in QuickBooks Online.

Why Do You Need to Clean Up Undeposited Funds in QuickBooks Online?

Cleaning up undeposited funds in QuickBooks Online is essential to ensure accurate accounting records and maintain financial transparency.

This process involves reconciling the undeposited funds account regularly, which can prevent discrepancies in the financial reports. Unattended undeposited funds may lead to inaccurate financial reporting, which can have detrimental effects on decision-making and overall financial stability.

It is crucial to address undeposited funds promptly to provide a true and fair view of the company’s financial position. Timely cleaning up of undeposited funds supports compliance with accounting regulations and enhances the credibility of financial statements.”

How to Clear Undeposited Funds in QuickBooks Online?

The process of clearing undeposited funds in QuickBooks Online involves several important steps to ensure accurate recording and reconciliation of payments.

Once you have logged into your QuickBooks Online account, navigate to the ‘Banking’ tab, and then select ‘Make Deposits.’ From here, you can review and select the undeposited funds you want to clear. It’s crucial to ensure that the deposits are matched with the corresponding invoices and payments, as this will accurately reflect the financial transactions.

Take your time to verify the details before finalizing the clearing of undeposited funds to maintain the integrity of your accounting records.

Step 1: Review Undeposited Funds Account

Before initiating the clearing process, it is crucial to review the undeposited funds account in QuickBooks Online to identify all pending payments and receipts awaiting deposit.

This step is essential as it ensures that all incoming funds are accurately tracked and recorded before being deposited into the bank account. By reviewing the undeposited funds account, discrepancies or missing payments can be addressed, maintaining the accuracy and integrity of financial records.

This process enables businesses to reconcile their accounts effectively, providing a clear picture of all pending transactions and their eventual deposit into the bank. It plays a pivotal role in maintaining financial transparency, aiding in the smooth functioning of the clearing process in QuickBooks Online.

Step 2: Create a Bank Deposit

The next step in clearing undeposited funds involves creating a bank deposit in QuickBooks Online to consolidate and record the pending payments for eventual deposit into the company’s bank account.

This process is crucial for reconciling accounts accurately and ensuring that all funds are accurately reflected in the company’s financial records. To create a bank deposit in QuickBooks Online, start by navigating to the ‘Plus’ icon and selecting ‘Bank Deposit.’

Next, select the account to which the funds will be deposited and add the payments to the deposit. Make sure to verify the details and allocate the funds to the appropriate income or expense accounts. Save the deposit to complete the process.

Step 3: Match Deposits to Invoices and Payments

Matching deposits to invoices and payments is a critical aspect of clearing undeposited funds in QuickBooks Online, ensuring accurate reconciliation and financial tracking.

By meticulously cross-referencing the deposited amounts with the corresponding invoices and payments, businesses can gain a comprehensive understanding of their financial transactions. This process facilitates the identification of any discrepancies or outstanding payments, contributing to a more streamlined and transparent financial record.

It also aids in maintaining an organized and up-to-date accounting system, which is essential for making informed business decisions and meeting regulatory requirements.

Step 4: Record Any Additional Deposits

Recording any additional deposits that may not have been matched to specific invoices or payments is the final step in clearing undeposited funds in QuickBooks Online, ensuring comprehensive and accurate financial records.

This process is vital for maintaining the integrity of your financial data, as it accounts for all incoming funds that might not have been immediately associated with a particular transaction. To execute this step in QuickBooks Online, navigate to the ‘Banking’ tab and select ‘Record deposits.’ Then, verify the deposit date, account, and amount, ensuring that it aligns with the actual deposit. Link any unapplied funds to the corresponding invoices or payments, completing the reconciliation process and ensuring that your records accurately reflect the financial activity of your business.

How to Fix Undeposited Funds in QuickBooks Online?

Fixing undeposited funds in QuickBooks Online requires a systematic approach to identify and resolve any discrepancies or issues related to pending payments and deposits.

It is essential to begin by reconciling all open invoices with the corresponding bank deposits. Ensure that each payment is correctly linked to a deposit in the Undeposited Funds account. Verify that the correct date and amount are entered for each transaction. In case of any discrepancies, double-check the payment and deposit entries to ensure accuracy.

Regularly reconciling the Undeposited Funds account with the bank statement can help in detecting and rectifying any inconsistencies.

Reconcile Your Accounts

The reconciliation of accounts is a fundamental step in fixing undeposited funds in QuickBooks Online, ensuring that all financial records align with actual transactions and deposits.

This process involves cross-referencing bank statements, invoices, and receipts to identify any discrepancies or missing transactions. By meticulously comparing the records, businesses can pinpoint any undeposited funds, which may have resulted from delayed deposits or unrecorded income.

Identifying and addressing undeposited funds is crucial for financial accuracy, as it ensures that all income is properly recorded and accounted for. Reconciling accounts allows businesses to gain a clear understanding of their financial status, enabling them to make informed decisions for future financial planning and budgeting. It also aids in maintaining compliance and transparency, contributing to the overall integrity of the financial records.

Verify Your Undeposited Funds Account

Verifying the undeposited funds account is crucial in the process of fixing discrepancies, ensuring that all pending payments are accurately recorded and accounted for in QuickBooks Online.

This step involves reviewing all transactions to confirm that the funds awaiting deposit match the actual amounts received. It helps to reconcile any inconsistencies and prevent errors in financial reporting.

By regularly verifying the undeposited funds account, business owners can maintain the accuracy of their financial records, identify any missing or duplicate payments, and ensure that the corresponding deposits are correctly reflected. This not only promotes transparency and accountability but also aids in accurate cash flow management and budgeting.

Check for Duplicate Transactions

Identifying and addressing duplicate transactions can significantly contribute to fixing undeposited funds in QuickBooks Online, ensuring accuracy and consistency in financial records.

It prevents overstatement of income and avoids discrepancies in reconciliations, which are crucial for decision-making and financial analysis. To resolve this issue, it is essential to regularly review bank and credit card statements, categorize transactions accurately, and use payment matching to identify and merge duplicate entries. Utilizing the ‘Find & Match’ feature and reconciling accounts can also aid in identifying and rectifying any redundant transactions.

Maintaining good record-keeping practices and conducting regular audits can help in preventing and addressing duplicate transactions effectively.

How to Get Rid of Undeposited Funds in QuickBooks?

Getting rid of undeposited funds in QuickBooks involves a meticulous process of clearing and reconciling pending payments to ensure accurate financial records and transparency.

This begins by accessing the Undeposited Funds account in QuickBooks and reviewing all pending payments, ensuring that each transaction matches the corresponding customer invoice or sales receipt. Once verified, the payments should be deposited into the appropriate bank account, and the transactions should be reconciled to reflect the accurate financial status.

It’s crucial to maintain consistency in updating and clearing undeposited funds to avoid discrepancies and errors in financial reporting, thereby upholding the integrity of the accounting system.

How to Delete Undeposited Funds in QuickBooks?

Deleting undeposited funds in QuickBooks requires careful consideration and accurate adjustments to ensure that all financial records remain consistent and transparent.

This process involves identifying the undeposited funds, verifying the reasons for their deletion, and making corresponding adjustments in the account. It is crucial to maintain a clear trail of documentation to support the deletion, such as notes detailing the reason for the adjustment and any approvals required. Transparency is key, and any changes made should be well-documented and easily traceable.

Accurate record-keeping is essential to ensure that the deletions are properly accounted for in financial reports and compliant with regulatory requirements.

How to Clear Undeposited Funds in QuickBooks Desktop?

Clearing undeposited funds in QuickBooks Desktop involves specific procedures and steps to ensure accurate reconciliation of pending payments and deposits within the desktop software.

It starts with reviewing the undeposited funds account to identify any transactions that need to be cleared. Then, you must create deposits for the funds to be correctly accounted for. Once the deposits are created, you can match them with the actual bank deposits to ensure all transactions are accurately reflected. Be sure to verify that the funds have been correctly allocated before finalizing the clearing process in QuickBooks Desktop.

How to Clear Out Undeposited Funds in QuickBooks Online?

Clearing out undeposited funds in QuickBooks Online is essential to ensure accurate financial records and transparency, requiring meticulous attention to pending payments and deposits.

This process starts by reviewing the undeposited funds account in QuickBooks Online to identify any transactions that haven’t been associated with a bank deposit. Once identified, these transactions need to be correctly matched and deposited to the appropriate bank account.

It’s imperative to verify that all payments received are accurately reflected in the system and properly reconciled with corresponding bank deposits. By regularly clearing out undeposited funds, businesses can maintain a clear and reliable trail of their financial transactions, promoting financial accuracy and transparency.

How to Turn Off Undeposited Funds in QuickBooks Online?

Turning off undeposited funds in QuickBooks Online requires careful adjustments to the settings and preferences, ensuring that all financial transactions are accurately recorded and reconciled.

One crucial step is to review the undeposited funds account and ensure that it reflects the correct balance. This involves reconciling the account with the related bank and income accounts to identify any discrepancies. Subsequently, it’s essential to adjust the undeposited funds settings to streamline the deposit process and prevent it from accumulating balances over time.

Accurate adjustments and reconciliations are crucial for maintaining the accuracy of financial reports, avoiding potential errors, and ensuring compliance with accounting standards.”

How to Clear Out Undeposited Funds in QuickBooks?

Clearing out undeposited funds in QuickBooks involves specific procedures and steps to ensure accurate reconciliation of pending payments and deposits within the software.

To begin, access the Banking menu in QuickBooks and select Make Deposits. Then, locate the undeposited funds account and ensure that all payments are properly matched and deposited into the appropriate bank account. It’s important to review each transaction carefully to avoid any discrepancies.

Verify that the deposit amounts in QuickBooks match those in your bank statements. Once the deposits are accurately recorded, the undeposited funds will be cleared, contributing to the overall accuracy of your financial records.

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Undeposited Funds Account in Quickbooks: What is it and How is it Used?

This post was originally published  January 18, 2016   and extensively updated August 15, 2018.

You have many accounting software options when it comes to keeping track of your business’s financial accounts.  One of the most popular options is QuickBooks . Many people enjoy using QuickBooks because it’s easy to use, has robust features, and can grow with their company.

Undeposited Funds Account in Quickbooks What is it and How is it Used - 1-1

What is the Undeposited Funds Account?

When it comes to recording sales and payments, most people use the “Sales” account found in QuickBooks. However, the undeposited funds account is an alternative option that can help you keep track of your money at a higher level.

Undeposited funds is useful for companies that collect money on a regular basis, but don’t actually deposit the money regularly. Large businesses, in particular, may delay depositing money for several days because it is tedious to deposit one check at a time throughout the working week.

If you’re depositing your checks one at a time, which is often the case for smaller businesses, you have to keep careful track of each and every deposit. However, when you use the undeposited funds account, you can record the specific checks in your software and not have to come back to them later to find out which is which.

Undeposited funds are like a big bag of money or cash drawer that you would keep your checks and cash payments in until you deposit them at the bank. You have already received the money, but it hasn’t been deposited in your account yet. You’re holding it until you make your weekly bank trip. This is the best way to record payments that have not yet been taken to the bank.

Although you can record it as “deposited”, you’ll create a better representation of your records and accounts   by getting into the habit of using the undeposited funds account found in QuickBooks.

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For a tutorial on how to use this account, we have put together a step-by-step instruction guide. While you are most likely familiar with the navigation system of QuickBooks, it may be difficult to find new accounts, especially if the system has been set up by someone other than yourself.

To begin, you need to ensure that the undeposited funds account is enabled in QuickBooks. To do this, go to “Edit” in the menu, select “Preferences” and then choose “Payments”, which is found in the sub-menu on the left side of the screen.

Then choose “Company Preferences” and select the box that reads “Use undeposited funds as a default deposit to account.” This setting will automatically put the money in this account, rather than your sales account, which would default to deposits automatically. This feature can be changed again at any time in the future.

Quickbooks

To use undeposited funds accounts, simply do the following:

  • Create an invoice, sales receipt, or statement of charge
  • Collect payment from your customer and apply it to the corresponding invoice
  • Record the payments in the undeposited funds account - which will automatically be done for you once you have enabled the account as described above.
  • Next, use “make deposits” to group many payments into a single deposit. This ensures that you don’t have to add individual invoices and the payments are recorded separately in the ledger.

Quickbooks 2

Don’t make the mistake of following the steps above and then forget to group your payments when you make your deposit. If you do this, you’ll end up showing your income as double, which of course, can cause problems for you and your company’s books. To see if this has occurred, check the balance in the undeposited funds account against the balance sheet report.

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When it comes to keeping your finances straight, QuickBooks   does a brilliant job of providing simple yet effective tools to see the flow of money in and out of your company. Using features such as undeposited funds accounts means that you benefit from a more robust accounting system, with more checks and balances and a better understanding of where your money is at all times. It can be frustrating to correct issues in QuickBooks when they happen, but you can avoid them by using the proper accounts for the proper transactions. If you run into trouble along the way, don’t hesitate to reach out to us. CMP would be happy to help you make the most of your QuickBooks experience and ensure your accounts are up to date and accurate. We provide a vast range of Quickbooks services to suit all your needs.  

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What Are Undeposited Funds in QuickBooks Online: Clear Undeposited Funds and Manage Your Accounts Smoothly

Undeposited Funds in QuickBooks

Do you know what those undeposited funds are in your QuickBooks Online account? Do you want to get rid of them?

Then you have reached the right place. Read on, and you will know all about these undeposited funds in QuickBooks Online and how to clear them.

QuickBooks is without doubt one of the most popular accounting and bookkeeping software systems today. It is perfect for small business owners thanks to its efficient features and seamless capabilities. But there are some bells and whistles that can make navigating through the system a bit difficult. Not that it will affect your financial operations, but not knowing the ins and outs may keep you from leveraging the advanced digital tool to its full potential. So, if you want to make the most of your QuickBooks subscription, first learn what are undeposited funds on balance sheets.

In accounting, your main goal is to be as accurate as possible. When you put every dollar you get against every dollar you spend, it’s easy to keep track of your activities and figure out what to do if something goes wrong. Even though accounting is not a new idea, the most recent version of it can be hard to understand. As a result of this, there are a lot of instances where mistakes can take place.

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One of the most common mistakes you may face with QuickBooks is undeposited funds piling up. Most people don’t even know what undeposited funds are or what purpose they serve, let alone handle them efficiently. This makes managing the task even more challenging.

But wait, there is nothing to be worried about. By the end of this blog, you’ll know all about these undeposited funds in QuickBooks Online. But most importantly, you’ll learn how to clear them and manage your accounts more effectively. So, without further ado, let’s get started right away.

Table of Contents

What Are Undeposited Funds in QuickBooks?

An undeposited fund is an account that is a component of the QuickBooks Online Chart of Accounts. Essentially, undeposited funds on balance sheets are used to hold up payments temporarily until they can be deposited into the bank. Most of the time, the bank will combine every payment you make into one transaction. You can do the same thing in QuickBooks once you have your deposit slip and know which payments your bank has combined.

Let’s elaborate on this with a real-life example.

When you deposit money in your bank account, you often put money in the bank from multiple payments in one single deposit. For example, let’s say you put five $100 checks from five different customers into your checking account. Your bank adds up all five checks and counts them as one deposit of $500. This is what you can do with QuickBooks as well. You need to combine the five different $100 entries in QuickBooks into one $500 deposit, which is exactly what your bank shows.

To this end, you can use the undeposited funds option in QuickBooks. Use the account to hold all your invoices and sales receipts that you want to combine before you deposit your money in your bank checking account. You can think of this as a virtual drawer or a lockbox where you keep your invoices and receipts before you take them to the bank.

Once you have your deposit slip, make a bank deposit in QuickBooks so that payments in Undeposited Funds will match up. This two-step process makes sure that your bank records and QuickBooks are always in sync. It also makes reconciliations a lot easier.

To sum up, once you get the hang of these undeposited funds, accounting and bookkeeping become easier than ever.

Identify Undeposited Funds

How to Identify Undeposited Funds?

Before you try to clear undeposited funds, make sure you identify your undeposited funds account correctly. This ensures that you are not deleting anything important by mistake and getting rid of only what needs to go.

Here is the easiest way to identify undeposited funds in QuickBooks:

  • Click the +New button above the left side menu on QuickBooks homepage
  • Select Bank Deposit in the Other category

Identify Undeposited Funds

Once you click on the option, you will see all your undeposited funds for the selected account like this:

Funds

What Causes Undeposited Funds to Build Up?

If you understand exactly what type of account is undeposited funds, let’s try to understand what causes their buildup.

In general, undeposited funds occur when you don’t follow the industrial standard process for your financial transactions. It occurs when.

  • You receive invoice payments
  • Make use of any payment item on an invoice
  • Create an entry for a sales receipt
  • Do not match the deposit with the invoice payment for correct bank reconciliation

In simple words, undeposited funds arise when you add a payment to any payment account in QuickBooks Online instead of making a deposit and recording it as a proper payment. This makes your payment account show an uncategorized amount of payment, which is thereby held as an undeposited fund.

To sum up, undeposited funds in QuickBooks pile up when you don’t follow the correct workflow. The correct process is:

  • You send the final invoice to your customer
  • Your Client makes payment for the invoice
  • This results in a cash balance in your account
  • You deposit the required payment and keep a record
  • Finally, you match the deposit with the payment

How to Reconcile Undeposited Funds in QuickBooks Online?

You can reconcile your undeposited funds in QuickBooks in a number of ways.

  • The first way is to go to the Banking page and click on the Reconcile button. This will lead you to a window where you can select all the undeposited funds you want to reconcile.
  • You can also go to the Accounts page and click on the Reconcile button. It will show the reconciliation window as well, where you can choose the account you want to reconcile. Once you click on the transactions that you want to deposit, QuickBooks will show you a list of undeposited funds. You can then select the transaction you want to deposit, and QuickBooks will automatically create a deposit.
  • You can also manually create a deposit on the Banking page. To do this, go to Banking, then select the Deposit button. This will open a window where you can select the account where you want to make the deposit, and then select the undeposited funds you want to deposit.

How to Turn Off Undeposited Funds in QuickBooks Online?

If you find this whole undeposited funds ordeal too stressful for you, you can always turn it off. To do this:

  • Go to Settings menu
  • Select Company Settings
  • Under company settings, select Advanced Settings. This will open the Accounting section
  • In the Accounting window, uncheck the box for Use Undeposited Funds as your default account to deposit for customer refunds and received payments

How to Clear Undeposited Funds in QuickBooks?

Now that you know what undeposited funds are and how to identify them, let’s move on to the important question at hand—how to clear/delete them?

Clear Undeposited Funds

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To clear undeposited funds in your account, you can follow either of these two methods:

  • Bank reconciliation
  • Dummy account

Steps to Clear Undeposited Funds through Bank Reconciliation

Steps to clear funds

  • Make the necessary deposit in your real bank account
  • Check the bank statement thoroughly for cleared funds
  • Use the bank deposit feature in QuickBooks to combine all the required transactions in your undeposited funds
  • Look closely at all the checkboxes for the undeposited funds that you want to combine
  • Make sure that the total amount in the undeposited funds is the same as the amount shown in your bank statement

Steps to Fix Undeposited Funds in QuickBooks through Dummy Account

Fix Undeposited Funds

  • Under the Chart of Accounts section, create a new checking bank account
  • Name the account carefully so that you don’t confuse with your real checking account
  • Save it and close
  • Now open the Bank Deposit window
  • Choose the dummy account
  • Click on the Account category box
  • Choose all the old customer payments you can see in your undeposited funds in QuickBooks
  • Save it and close the window
  • Now the balance in your undeposited fund should indicate zero balance

At this point, make sure to delete your dummy account. To do this:

  • Click on the Expense window and create an expense transaction
  • Select a payment account that you use for transferring money from dummy accounts
  • Transfer the balance

If you are using QuickBooks Online for your accounting and bookkeeping purposes, it is crucial that you understand its functionalities and follow the proper workflow. Making mistakes while using accounting software is worse than making mistakes in accounting and bookkeeping. Because in the former case, you are spending money to manage your finances and still making mistakes. And the most common mistake that people make while using this software is that they allow undeposited funds in QuickBooks to pile up. This could lead to a serious revenue loss.

Another common mistake that people make in accounting and bookkeeping is wrong data entry. This mostly happens when you have to make double entries on different platforms. This is especially relevant if you are using both accounting software and field service software.

But there is a simple solution to this problem—sign up for a field service management system that supports QuickBooks integration. And the best choice in this regard is definitely Field Promax.

Field Promax supports the most seamless integration with both QuickBooks Online and QuickBooks Desktop with a robust two-way data sync. This way, you can use the same information for a myriad of tasks—from creating job orders and managing payments to sending invoices to the customer—with just a click of the button. There is no need to worry about wrong data entry, double entry, or missing important data in any of your documentation processes. The result is flawless accounting and bookkeeping, timely payment, and top-of-the-line customer satisfaction, with the assurance that you never face the risk of revenue loss, ever again!

For more information, contact Field Promax .

QuickBooks keeps customer funds in the Undeposited Funds account until you deposit them in your real bank account. Once you have your deposit slip, you can combine these payments into a single record so that QuickBooks corresponds to your bank records.

Undeposited Funds is simply a holding account that tracks payments received from customers that have not been deposited into your bank account.

If you entered the payment to undeposited funds and then added the bank entry as a sale, you will have overstated your earnings, and your profit figures will be overstated.

You’ll find Undeposited Funds on your Balance Sheet under Other Current Assets. In simple terms, this is money that your organization has received from customers but has not yet been deposited into your bank account. When you use the Make Deposits form, your bank account will be credited with the Undeposited Funds.

It is very important to keep your Undeposited Funds Account in order and clear it out regularly. This account should show a zero balance at the end of every accounting period and, if possible, each time a deposit is made at the bank.

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How to clean up Undeposited Funds in QuickBooks Online

undeposited funds report quickbooks online

Eric is busy these days. He’s running a business and does his best to keep track of his numbers. Despite his best intentions, Eric is a bit disorganized and still hasn’t quite figured out how to use QuickBooks Online. While reviewing his numbers, Eric sees an unusually large balance in Undeposited Funds. He’s really confused and he doesn’t know what to do. Eric is now worried that all these undeposited customer payments will distort his financials and affect his taxes. Eric’s dilemma is something many untrained QBO users experience. So today, I’m going to show you how to clean up Undeposited Funds in QuickBooks Online.

Here’s a video tutorial, showing you two methods you can clean up Undeposited Funds.

Wait! What are Undeposited Funds?

If you’re new to QBO, you may be unfamiliar with what we are referencing when we say the ‘Undeposited Funds account’. If so, check out this blog post – Unraveling the mysteries of the QuickBooks Online undeposited funds account . It will help you to better understand the Undeposited Funds account in QBO.

Money-in transactions in QBO

Once you’ve got that out of the way, let’s get familiar with the “money-in” transaction process. Understanding this process is essential if you want to learn how to clean up Undeposited Funds.

undeposited funds report quickbooks online

Reconcile first before cleaning up Undeposited Funds

Before proceeding to clean up Undeposited Funds, make sure that your bank accounts are reconciled . You can learn more about reconciling bank account by reading this blog post – Why the 90s called and they don’t want their bank reconciliation back .

Here’s a video tutorial on how to reconcile a bank or credit card account

As a best practice – we highly recommend that all bank accounts be reconciled first, before cleaning up Undeposited Funds. Here at VM Wasek , we always reconcile before performing major cleanups of our clients’ Undeposited Funds.

[bctt tweet=”As a best practice – we highly recommend that all bank accounts be reconciled first, before cleaning up Undeposited Funds.” username=”5MinBookkeeping”]

The most-common reasons for old payments undeposited funds account in quickbooks online.

In this section, I’ll go over some common reasons for having old payments in Undeposited Funds.

1. Improper workflow

The #1 reason for old customer payments in undeposited funds is an improper workflow.

Let’s work through an example of an improper workflow:

undeposited funds report quickbooks online

  • Eric categorized the $200 money-in transaction to Uncategorized Income, because that is the category to which the transaction automatically defaulted to.
  • He then added the money-in transaction to QBO.

undeposited funds report quickbooks online

In summary, Eric ends up with two errors:

  • A Deposit categorized to Uncategorized Income
  • An old customer payment in Undeposited Funds.

2. Lack of Training

Eric could have avoided this mess, had he had the proper training. Having a solid foundation in QBO is essential if you want to avoid making a mess.

If you feel like you need to gain a more solid foundation in QBO, then be sure to check out our master class: Mastering QuickBooks Online banking transactions in 7 days . This course will show you how to handle Banking Transactions, including money-in transactions such as customer payments .

Meanwhile, in the next section, I’ll show you how to fix Eric’s improper workflow.

Now that I’ve shown you a very common reason for old payments in Undeposited Funds, I’m going to show two methods for cleaning up those old payments, so you can get your books in order.

1. The Remove and Record method for cleaning up Undeposited Funds

We’ll start with removing the incorrectly-entered deposit

  • First, go to the Banking section.
  • Select the bank account where the customer payment was intended to be deposited to.
  • Then, select the “In QuickBooks” tab.

undeposited funds report quickbooks online

  • Locate the $200 deposit.
  • Then, click “UNDO” under the Action column. This will remove the transaction from QBO.

undeposited funds report quickbooks online

Now, record the deposit in the Bank Deposit window.

  • Select the bank account used to make the deposit.
  • Enter the date when the customer payment was deposited.
  • Select the $200 customer payment from Cool Cars in the “Select Existing Payments” list.
  • Select Save and close.

undeposited funds report quickbooks online

Remove and Record Method Pros and Cons:

Pros: This is the most accurate way to clean up payments in Undeposited Funds. It will eliminate any redundant transactions and your sales income will also be correct.

Cons: You must work through each payment one-by-one, so the process will be time-consuming. You must also have documentation to back-up all the transactions you are correcting.

2. The Dummy Bank Account Method for cleaning up Undeposited Funds

Now let’s look at the second method. What do you do when you have multiple old payments sitting in Undeposited Funds, but you don’t remember how they got there? – You clear them out with a Dummy Bank Account.

undeposited funds report quickbooks online

Open the Bank Deposit window

  • Select the Dummy Bank Account as the account you will be depositing to.
  • Select the customer payments that you want to clear out.
  • Then, select Save and Close .

undeposited funds report quickbooks online

  • Next, Create an Expense transaction.

undeposited funds report quickbooks online

Remember, a Dummy Bank Account is not a real bank account, so it should not have an ending balance of any kind.

Dummy Bank Account Method Pros and Cons:

Pros: This is a quick and easy way to clean up old, outstanding payments. You will save a lot of time using this method.

Cons: Although you may save time, you can lose accuracy. Clearing out undeposited customer payments with a Dummy Bank Account will understate income. Understanding income by a potential large amount may have tax implications. Talk to your tax accountant to learn more about these tax implications.

Eric is relieved to now know two processes for cleaning out these old balances, so he can have cleaner financials. Now that we’ve shown you how to clean up undeposited funds in QuickBooks Online, we hope that you will also apply one of these solutions to clean up any old balances in your undeposited funds account. Remember, if you’d like additional training, check out our master class: Mastering QuickBooks Online banking transactions in 7 days .

Good luck and best wishes!

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Hi. For the remove and record method: I have already reconciled, but would like to use this method to clean up my undeposited account. Once I remove it…wouldn’t that throw-off my reconciliation? How would I match the reconcíliated transaction to the undeposited transaction?

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Yes, that would throw your reconciliation out of balance. You would need to update your reconciliation.

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COMMENTS

  1. How to create a report of your total Undeposited Funds

    In the Action column of the Undeposited Funds account, select the dropdown arrow, and then select Run report. Things to know about the report of your total Undeposited Funds: This report will show a list of current Undeposited Funds as well as funds previously undeposited for the time period or date range selected.

  2. Solved: Report of Undeposited Funds that contains only the ...

    1 Join the conversation Best Answers vpcontroller Level 11 January 02, 2018 07:40 AM In QBO, filter Reconciled Status by "Not Reconciled" selection from the Assets Register (Dashboard > Accounting > Undeposited Funds > View Register > Funnel icon at top left row > Reconciled Status > Not Reconciled > Apply).

  3. How to Use Undeposited Funds in QuickBooks Online

    Every QuickBooks Online file has an Undeposited Funds account. This account is created automatically as part of your business's chart of accounts and cannot be deleted. If you try to do so,...

  4. How To Use the QuickBooks Online Undeposited Funds Account

    Step 1: Put Checks and Cash Received Into the Undeposited Funds Account Record the payment received from your customer and place it into the Undeposited Funds account. Use the Receive payment form when your customer pays you for an invoice and the Sales receipt form when you receive immediate payments.

  5. How can I create a report that shows a list of undeposited funds?

    To create a report that shows a list of Undeposited Funds you can run an Account QuickReport. From the gear icon at the top right, go to Chart of Accounts. Locate your Undeposited Funds account and click on it once to highlight. Once highlighted go to the top right and click on Report.

  6. How To Clear Undeposited Funds In Quickbooks Online

    Undeposited funds are a temporary account in QuickBooks Online that acts as a holding account for customer payments received but not yet deposited into your bank account. When you receive a payment from a customer, QuickBooks automatically assigns it to the undeposited funds account, rather than directly to your bank account.

  7. Understanding and Using Undeposited Funds in QuickBooks Online

    In this QuickBooks tutorial, I'll help you understand the undeposited funds in QuickBooks online and how it's used.Read the blog version with step-by-step in...

  8. How to record a bank deposit (using undeposited funds) in QuickBooks Online

    Get personalized help recording bank deposits with QuickBooks Live: https://quickbooks.intuit.com/live/pricing/?cid=VIDEO-CS-US-QBL_DIWM-NA-XSLL-EDU-PROD-OIC...

  9. Undeposited Funds Account Report in QuickBooks

    Undeposited Funds Account Report in QuickBooks - YouTube 0:00 / 0:34 QuickBooks 30-day free trial + 30% off for 12 months:...

  10. How to Find Undeposited Funds in QuickBooks

    Step 1: Check the Undeposited Funds Account. The first step in finding undeposited funds in QuickBooks is to check the Undeposited Funds account within the software to identify any unresolved or unallocated funds. Once you access the Undeposited Funds account, ensure that all payments received are correctly recorded and matched with ...

  11. How to Clean Up Undeposited Funds in QuickBooks Online

    Undeposited funds in QuickBooks Online refer to payments received by a company that have not yet been deposited into the bank account. These funds serve as a temporary holding account and allow for grouping multiple payments together before depositing them into the designated bank account.

  12. QuickBooks Undeposited Funds Account: Step-by-Step Guide on Using

    The Undeposited Funds Account is a special account in QuickBooks where you can send invoices, record sales receipts, receive payments, and then combine them later and deposit them to your real-life checking account. It's compared to a lockbox where you'd keep all the cash and checks before taking them to the bank and making a deposit.

  13. Undeposited Funds Account in Quickbooks: What is it and How is it Used?

    To begin, you need to ensure that the undeposited funds account is enabled in QuickBooks. To do this, go to "Edit" in the menu, select "Preferences" and then choose "Payments", which is found in the sub-menu on the left side of the screen. Then choose "Company Preferences" and select the box that reads "Use undeposited funds ...

  14. Undeposited Funds in QuickBooks: How to Clear Them

    An undeposited fund is an account that is a component of the QuickBooks Online Chart of Accounts. Essentially, undeposited funds on balance sheets are used to hold up payments temporarily until they can be deposited into the bank. Most of the time, the bank will combine every payment you make into one transaction.

  15. How to Clean up Undeposited Funds in QuickBooks Online

    There are two ways to clean up undeposited funds in QuickBooks Online. The correct way, and the quick way! If you have old transactions in your undeposited...

  16. How to clean up Undeposited Funds in QuickBooks Online

    The Remove and Record method for cleaning up Undeposited Funds. We'll start with removing the incorrectly-entered deposit. First, go to the Banking section. Select the bank account where the customer payment was intended to be deposited to. Then, select the "In QuickBooks" tab. Locate the $200 deposit.

  17. What's the Undeposited Funds account?

    Learn how it works. Use the Undeposited Funds account to hold invoice payments and sales receipts you want to combine. It's like the lockbox (or drawer) you keep payments in before taking them to the bank. When you have your deposit slip, make a bank deposit in QuickBooks to combine payments in Undeposited Funds to match.

  18. How do you reclassify multiple payments from Checking ...

    Here's how: Go to Transaction. Then, Chart of Accounts. In the Search field, enter the Checking account. Once it shows up, click Account History. Click the Funnel icon to filter it out. In the Transaction type, choose the kind of payment you want to reclassify. You can also specify the date and some of the info. Tap the payment transaction.

  19. Two line items on the Income Statment.

    This is different than your question of whether income is recorded when it is deposited into the company's bank account. On cash basis, income is recorded when you receive the payment, not when you deposit it, if those two events happen at a different time. If you use undeposited funds (UF) in QB, then income is recorded when payment is put ...

  20. Solved: Quickbooks Desktop 2018

    From there, you can check the transactions deposited from undeposited funds to the bank. Here's how: Go to the Reports menu. Select Banking from the drop-down menu. Choose the Deposit Detail report from the list of reports. Click on Customize Report and select the Filter tab. Select the Transaction Type from the dropdown list and click Sales ...