Undeposited Funds is a default account in QuickBooks that holds funds from payments to your company until you deposit them to your bank account. You can’t deposit funds directly to Undeposited Funds, because it’s only a temporary account; you can deposit the funds in a single transaction after you take your deposits to your bank account. The advantage to a lump sum payment is that your transactions are still itemized in the account register, but you only have to check the lump sum deposits when reconciling transactions with your bank statements .
Enter Transactions With Undeposited Funds
Click the “Lists” menu, and then select “Items.”
Select the type of payment from the “Type” drop-down menu, and then add any additional information for the transaction.
Click the “Account” drop-down menu, select “Undeposited Funds,” and then click “OK.”
Deposit Undeposited Funds
Click the “Banking” menu, and then select “Make Deposits.”
Select the payments from Undeposited Funds that you want to deposit. If the “Payments to Deposit” window doesn’t open automatically, click “Payments” on the “Make Deposits” window. Click “OK.”
Click the “Deposit To” drop-down menu and select the bank account you want to use for the deposit.
Enter the date in the Date field, and then, if applicable, enter any additional payments to deposit that didn’t come from the Undeposited Funds account.
Click “Print,” select the option to print a deposit slip, and then click “Print.”
Click “OK” to save the transaction. Take the deposit slip to the bank and deposit the funds into your account.
Invoice Payments: Undeposited Funds (Quickbooks Online)
Why do synced invoices from 17hats show up under “Undeposited Funds” in Quickbooks Online?
When a payment is pushed from 17hats to QuickBooks Online, by default it will go to “Undeposited Funds”. Undeposited Funds is an internal other current asset account created by QuickBooks to hold funds until you are ready to deposit them. It serves as the default Deposit To account when you:
- receive payments
- use a payment item on an invoice, or
- enter a sales receipt
Most accountants/bookkeepers want this because it allows you to match your bank deposits with the actual payments, for reconciliation purposes. e.g. most credit card processors will deposit the funds in your bank 2-3 days after the actual payment, so your bookkeeper can then leave the undeposited payments in undeposited funds until they actually get deposited, and then move them over to the bank account in QuickBooks.
This article on Intuit’s QuickBooks Help Centre regarding the Undeposited Funds account: Understanding How the Undeposited Funds Account Works .
How Do I Deposit Undeposited Funds in QuickBooks Online
- Transfer funds from undeposited funds to QBO
- Quickbooks Online
- Click (+ New) at the top-left
- Click Bank Deposit under Other
- Select which account in the Account dropdown to move the funds to
- Select the Payments to move using the checkboxes below
- Click Save and new at the bottom right
Creating Deposits Using the Undeposited Funds Account
Undeposited Funds 101
Novi AMS associations will notice Undeposited Funds when receiving payments.
Undeposited Funds is simply a holding account that tracks payments received from customers that have not been deposited to your bank account.
Thinking in literal terms, this is your “desk.” It’s where checks live once they have been applied as payments, but before they have been deposited. In a perfect world, transactions would only live in this account for a few minutes while they’re sitting on your desk.
The most important reason for using Undeposited Funds when receiving payments and making deposits is to ensure that your bank statements will match your QuickBooks bank account ledger. If you receive two payments, a check for $50 and another for $100, and deposit those checks, your bank will report a deposit of $150. If you didn’t use Undeposited Funds, your ledger will show the individual checks, and reconciling your bank account could quickly become a nightmare.
Receiving Payments and Making Deposits
In the video above, we used a QuickBooks Online sandbox account to recreate common transactions that would use undeposited funds. In this guide, we will walk you through the steps and purpose behind undeposited funds.
1. Receive Payment
First, find your customer with an open invoice in QuickBooks. Under the Action tab, click “Receive Payment.” Notice that when you go to receive the payment, QuickBooks will automatically deposit this to undeposited funds, shown below.
Be sure to Save & Close.
Next, we repeated the process for Bill’s Windsurf Shop to show how undeposited funds works with multiple payments.
Want to check your work?
You can double check your work by going to Transactions > Chart of Accounts. Search for Undeposited Funds. Under the Balance tab, you will see a balance that should match the amount of the payments you just received. If you click “View register” you will see the specific payments included in the balance, shown in the screenshot below.
2. Deposit Into Your Bank Account
Now that you’ve received payments and checked your work, your next step is to deposit the checks that are sitting on your desk.
In the top right corner of the screen, click on the plus sign icon and choose “Bank Deposit” under the “Other” category.
You should see your undeposited funds payments at the top of the screen under “Select Existing Payments.” Select the payments you would like to deposit and which checking account you want them deposited into, as shown in the screenshot below.
At the bottom of the screen, you will see a section titled “Add New Deposits.” This is a place for nontraditional checks that come in from outside places and are not necessarily payments received from customers.
For example, If you want to add in a reimbursement check or a check from a utility company, this is the place to do it. You can go in to this section (shown in the screenshot below), type in the name of the check sender and choose to add them as a customer, vendor, or employee. Then, choose the account the money came in from and the amount of the check.
Want to Check Your Work?
View the Undeposited Funds Register
Once you Save & Close out of the Deposit screen, you will be back in the undeposited funds register that is now at $0. This register acts as a holding account, so your goal is to be at $0. If you have QuickBooks Payments, it will also use this account. You may see credit charges coming through from Payments, so the amount may not always be $0, but that is the goal.
View the Bank Register
Finally, go to Transactions > Banking to see your bank register for your checking account. On the right-hand side, click “Go To Register.” Here you will see the total amount of the deposit, shown in the screenshot below.
Understanding this final portion is very important because your bank statement will show you this total amount of the deposit, as opposed to the varying amount of the different checks.
Perhaps this data map can help.
Reconciling Undeposited funds in Quickbooks
we maintain the accuracy of payments Reconciling Undeposited funds in Quickbooks
- When the payment is processed in Quickbooks via Check receipt or Credit Card Payment, it is recorded to an Undeposited funds account.
- When subsequently payment is received in bank feeds, we need to check each individual deposit and enter a whole amount of receipt into the bank.
- This would ensure that the Undeposited fund’s account is made Nil and Bank register is Debited with the same amount.
- The transactions that remain in undeposited funds need to be analyzed for accuracy.
- Steps for recording transaction via Undeposited funds:
a. Enter a transaction of receive payment
b. Match the multiple transactions or receive payments with deposit:
c. Reconcile this transaction in the bank account.
Reconciliation of undeposited funds Accounts
What is an undeposited fund account in Quickbooks?
First, we need to understand which funds are recorded as undeposited funds in the Quickbooks, it’s simple when you the first time receive a payment, and Quickbooks create an undeposited fund account that becomes a default deposit to account for some kind of payment in the future. Suppose after receiving payment invoice, sales or credit card receipt, Quickbooks automatically generates the undeposited fund account.
Need to check deposits
When you are receiving subsequent payments than you take individual payment option to your financial institution like a bank, you can transfer the undeposited fund account by going to the “Make deposits window.” After getting the payment we can see that in bank feeds and that creates the need to check each of the individual deposits and enter the whole amount of receipt into the bank.
By doing this, you can ensure that all the transactions made in the undeposited account are made nil and the bank account is also debited with the same amount. And the remained fund in the undeposited accounts also needs to be verified for accuracy.
How to record transaction via an undeposited fund account?
Recording transactions using an undeposited fund account is simple. These are the basic steps that need to be followed.
- Enter a transaction of received payment:
There would be different payment transactions deposited into the undeposited account. Select the one payment transaction you want to record.
- Match the multiple transactions of receiving payments with deposit:
There would be subsequent payment transactions with the one you record, match all those transactions so you can add them all in one go. Groping those transactions would definitely make the process easy and rapid for you.
Following this, you can also match your bank activities. You can select all the transactions you want to deposit and select an appropriate bank account.
- Importance of Reconciling this transaction in the bank account:
After following all these steps, you can see that undeposited fund accounts have become $0.00. That will also make the bank account deposited with the same amount. You can then cross-check both the accounts. Therefore, it’s important to reconcile bank accounts with Quickbooks.
It’s very important as it shows the inflow-outflow of payments. It is necessary to complete this process with proper articulation to ensure that we maintain the accuracy of payments. It also helps to have a glance at your business payment transactions at any time.
The Undeposited Funds Account in QuickBooks Online
If you receive more than one customer payment on any given day, you’ll find the Undeposited Funds account in QuickBooks Online (QBO) a convenient way to handle the money that comes into your business. If you take several checks to your bank on a given day and deposit all of them as a single deposit, most banks typically don’t record the individual checks as individual deposits.
Instead, the bank records the sum of the checks as your deposit — pretty much the same way you sum the checks on the deposit ticket you give to the bank teller.
“And why is this important?” you ask. This fact is important because, when you receive your statement from your bank, you need to reconcile the bank’s deposits and withdrawals with your own version of deposits and withdrawals.
If you track each customer payment you receive as a deposit in the bank, then your deposits won’t match the bank’s deposits. And, if you don’t use the Undeposited Funds account — and instead record customer payments directly into your QBO bank account — your deposits definitely won’t match the bank’s version of your deposits.
Enter the Undeposited Funds account in QBO, which acts as a holding tank for customer payments before you’ve prepared a bank deposit slip.
How to Use Undeposited Funds in QuickBooks Online
Every business has undeposited funds. Sometimes funds are “in transit” for less than a day, as when a customer pays you with cash or a check and you take the money to your bank at the end of the day. Other times, funds might be in transit for several days. This is most common when you batch your deposits—only going to the bank once or twice a week—or when you accept a credit card payment and it takes a day or two for the funds to clear your bank account.
QuickBooks Online has a special account specifically for these funds in transit. Unfortunately, the Undeposited Funds account in QuickBooks Online is one of the most misunderstood accounts—and one of the accounts most likely to cause a business’s financial statements to be incorrect.
Let’s take a closer look at how to use the Undeposited Funds account in QuickBooks Online, including what it is and how to keep it accurate so you can keep your business accounting operations running smoothly.
What Is the Undeposited Funds Account?
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, QuickBooks Online will just create a new Undeposited Funds account for you.
Pro tip: If you decide you don’t want to use the Undeposited Funds account in QuickBooks Online, rename the account to “Do Not Use—Undeposited Funds” or “DNU—Undeposited Funds.” This won’t delete the account, but it will give you a visual cue to not post payments to this account.
The Undeposited Funds account in QuickBooks Online is an “Other Current Asset” account. A current asset is something you own that you intend to convert to cash (or in this case, deposit in the bank) within a year.
In simpler terms, the Undeposited Funds account in QuickBooks Online is a holding account for the money you have received and intend to deposit, but you haven’t deposited yet. This is different from petty cash or your cash register till, which is cash you have on hand but don’t intend to deposit. As you can see in the image above, QuickBooks Online instructs you to use the Cash On Hand account instead of the Undeposited Funds account for petty cash.
Reasons to Use the Undeposited Funds Account
There are two primary reasons to use the Undeposited Funds account in QuickBooks Online.
1. Accurately record the date a payment was received. Let’s say your customer sent you a check for services rendered. You received the check on the last day of the year, which happened to be a Saturday.
In order for your financial statements to be accurate for the year, you need to record the payment as being received on December 31. However, the payment will not clear your bank until January 2 of the next year, at the earliest.
When you use the Undeposited Funds account, you can record the date the payment was received accurately and still keep your bank account in order by actually recording the deposit to the bank account on the day you make the deposit.
2. Your deposit contains payments for multiple invoices. Chances are you will occasionally receive payments from multiple customers and batch those into one deposit. Posting these payments to the Undeposited Funds account will allow you to correctly record the deposit in QuickBooks Online, making reconciling your bank account easier.
For example, let’s say Willie’s Widgets paid you $300, Wally’s Whatsits paid you $750, and Whitley’s Whosits paid you $200. You batch these payments into one deposit totaling $1,250. However, you need to properly credit each customer for their payment. Posting each payment to the Undeposited Funds account and then recording the deposit in QuickBooks Online allows you to do this.
You can use the Undeposited Funds account with any type of payment: cash, check, ACH, or credit card. If you use QuickBooks Payments to process your ACH and credit card transactions, though, there is no need to post the payments to the Undeposited Funds account. QuickBooks Online handles these payments behind the scenes, and you’ll only see them in the Undeposited Funds account if QuickBooks Online is unable to correctly post them for you when the payment clears.
Undeposited Funds Account Alternative
Many QuickBooks Online users prefer to post payments straight to their bank accounts rather than using the Undeposited Funds account. This is fine if you are posting a single payment. However, posting each payment in a deposit individually to the bank account will make it more difficult for you to reconcile your bank statements each month, making it harder to detect errors and possible fraud.
Most QuickBooks Online users find it easier to always post to the Undeposited Funds account first, and then enter the deposit into QuickBooks Online separately. Doing this does result in an additional step, but memorizing one way of recording payments is easier than having to remember multiple processes.
How to Use the Undeposited Funds Account in QuickBooks Online
If you’re still unsure about why you should use the Undeposited Funds account or how it works, the following step-by-step example will help.
1. Receive payments from your customers. Your customer has given you a payment for goods purchased or services rendered. If your customer is paying an invoice you have entered into QuickBooks Online and sent to them, you will want to record the payment using the Receive Payments option.
Click on the “+ New” button, then select Receive Payment.
Choose the customer from the drop-down menu. You can also search by invoice number instead of customer name.
Now, select the invoice or invoices the customer paid. Make sure you select Undeposited Funds from the “Deposit To” drop-down menu, then save the transaction.
If your customer paid you when they made the purchase—meaning you didn’t send them an invoice for payment at a later date—enter a sales receipt instead.
Again, make sure you are selecting Undeposited Funds from the “Deposit To” drop-down menu, and save the transaction.
Continue entering payments received from your customers until all payments have been entered.
2. Create the deposit in QuickBooks Online.
Select all the payments you will include in the deposit, making sure the amount you record in QuickBooks Online matches the amount on your bank deposit slip. Also, be sure you are posting the deposit to the correct account—in this case, checking—and that the date on the transaction is the date you will take the deposit to the bank. Then, save the deposit.
3. Check your work. Now, when you check the Bank Register for your checking account, you can see the deposit posted for the correct amount.
It appears as a “Split” transaction because the deposit is made up of multiple payments.
4. Reconcile the transaction. When the deposit clears the bank, you will be able to match the deposit in your bank feed. If you don’t use the bank feed function in QuickBooks Online, you will still be able to easily reconcile the deposit when you get your bank statement.
Keeping the Undeposited Funds Account Accurate
The “normal” balance for the Undeposited Funds account is $0. If you see a balance in Undeposited Funds on your balance sheet, you need to investigate.
First, reconcile your bank accounts to make sure you have recorded all the deposits you have made. Once you have determined all deposits have been recorded properly, open the Bank Deposit screen again and review what is in the Undeposited Funds account.
In this case, two transactions make up the $2,062.52 balance.
Since both transactions were dated on January 29, the first thing to check for is a deposit in your Bank Register for $2,062.52 dated on or around January 29. It’s possible the deposit was posted straight to an Income account rather than matched to payments received. Also check for two separate deposits for $1,675.52 and $387, respectively.
If you find that the deposit was posted straight to Income in the bank feed, unreconcile the transaction, undo the entry, and then match the transaction properly. Then, reconcile the transaction again.
This troubleshooting process can take some time, but it resolves most incorrect balances in the Undeposited Funds account.
Why a Journal Entry Won’t Work
Some accountants or bookkeepers who don’t understand the full functionality of QuickBooks Online might try to fix incorrect balances in the Undeposited Funds account with a journal entry. Although this will remedy the incorrect account balance on the balance sheet, it will not clear the undeposited transactions from the Bank Deposit screen.
If you have a large number of transactions in the Undeposited Funds account, or if the transactions extend into previous years, enlist the help of a bookkeeper who understands QuickBooks Online and how to properly resolve transactions in the Undeposited Funds account. Otherwise, you run the risk of either understating or overstating your income, both of which will have tax implications.
The Undeposited Funds account in QuickBooks Online is an important tool to help you properly record both customer payments and bank deposits. If you follow the workflow outlined above, you should have no trouble keeping your Undeposited Funds account—and your books—in good order.
Should something go awry with your Undeposited Funds account and you discover undeposited transactions in your Bank Deposit screen or have an unresolved balance in your Undeposited Funds account, contact a bookkeeper or an accountant who knows how to properly fix this account in QuickBooks Online. This will help you keep your customer balances and your total taxable income accurate. Your bookkeeper or accountant can also give you workflow suggestions specific to your business, giving you peace of mind about your processes and that you are running your business with the best financial information possible.
Import Undeposited Funds Deposits into QuickBooks Online
How are Deposit imports posted from Undeposited Funds when importing with Transaction Pro Importer into QuickBooks Online (QBO)?
When importing Deposits into QBO with TPro Importer, Deposits can be posted from Undeposited Funds. However, the Receive Payment or Sales Receipt transaction must have a Payment Reference Number in order to process this type of transactions with an import with TPro Importer.
When importing a Deposit transaction import type to post from Undeposited Funds, the required fields to map in TPro Importer are:
- REFNUMBER: To group imported detail lines together into a single Deposit
- DEPOSITTOACCOUNT: To specify to which General Ledger Bank Account QBO is to post the Deposit
- LINKEDTXNTYPE: To specify the transaction type of either PAYMENT or SALESRECEIPT associated with the amount
- LINKEDTXNNUMBER: To specify the Payment Reference Number associated with the amount to Deposit
- CURRENCY: To specify the currency of the Deposit, if using Multi-currency in QBO
TXNDATE is not required but should be used to specify a specific Deposit date. Otherwise, the Deposit will post to the date that the import is processed.
The Customer (ENTITY), Payment Amount (LINEAMOUNT), or General Ledger Account Undeposited Funds (ACCOUNT) are not needed when posting a Deposit from Undeposited Funds.
When manually processing a Bank Deposit in QBO, the following transactions show as available to be posted from Undeposited Funds:
The first two include a Payment Reference Number. Therefore, they can be part of a Deposit import with TPro Importer. However, the third cannot because there is not a Payment Reference Number. To be able to include the third transaction in a Deposit import, a Payment Reference Number will need to be added in QBO.
For the other two transactions, here is how the imported file would look when mapped in TPro Importer:
The below screenshot shows the entry screen for Deposits in QBO with the location indicated into which each Transaction Pro Importer field will import including when importing a Deposit posted to Undeposited Funds.
Use Undeposited Funds Account to Receive Payments in QuickBooks Online
Learn the best ways to use the undeposited funds account to receive payments in QuickBooks Online (QBO)
No doubt, QuickBooks is the world’s best accounting and bookkeeping software made by Intuit. Talking about the undeposited funds account in QuickBooks online, it serves a special function, as it is a special temporary account that is used by the QuickBooks accounting software for holding the payments that are received from invoices before the user deposits them into the bank account. If you are one of the users who import payments data from external processing services, and do not process transactions via QuickBooks payments, then this workflow is essential for you.
In today’s article, we are going to discuss the use of the undeposited funds account, in order to receive payments in QuickBooks Online. Thus, if you are looking for the entire process to use the undeposited funds account to receive payments in QuickBooks online, then your search ends with our article.
Go through the article till the end, to learn the process. However, for expert assistance, you can make a call at our toll-free number i.e. 1-844-405-0907, and discuss your issue with our QuickBooks support team of experts and certified professionals.
Significance of Undeposited Funds Account
As stated above, undeposited funds is an account in QuickBooks accounting software that holds funds from the payments until they are deposited in the bank account. As per the experts, the user can’t deposit the fund directly to undeposited funds. The reason behind this is that it is just a temporary account that means that the user can deposit the funds in a single transaction only after he/she takes the deposits to the respective bank account.
Making a lump sum payment is beneficial in a way that the transactions remain itemized in the account register, but all that user is supposed to do is to check the lump sum deposits when reconciling transactions with the statements of bank.
You may also read: How to convert your QuickBooks Desktop file to QuickBooks Online?
Reason behind using Undeposited Funds Account
Many QuickBooks users ask this question very often that why they should make use of the undeposited funds account. The undeposited funds account is an internal “other current asset account” crafted by QuickBooks. For instance, if the Undeposited funds account is a lockbox or safe, where the user keeps the payments till the time they are not deposited in the bank account. This account in actual serves as a default “deposit to” account and is designed in a way to work with the receive payments and bank deposit features, in order to complete the invoicing process. The user can make use of this account for single or group payments.
Steps to enter transactions with Undeposited Funds
If you want to enter the transactions with undeposited funds, you need to follow a step by step process. The steps involved are as follows:
- The very first step is to click on the ‘Lists‘ menu, followed by selecting the ‘Items‘ option.
- The next step in the process is to select the option of payment from the ‘Type drop-down list‘ and then further add any additional information for the transaction, if needed.
- Lastly, the user is supposed to tap on ‘Account drop-down list‘ and also select the “UndepositedFunds“, followed by hitting “OK“.
How to Deposit Undeposited Funds in QuickBooks?
The user can implement the steps below for depositing Undeposited Funds Account to Receive Payments in QuickBooks Online–
- To begin with, the user is required to hit ‘Banking‘ tab and then select the “MakeDeposits“ option.
- The next step in the process is to select the payments from Undeposited Funds that the user wishes to deposit. In case the “Payment to Deposit” window does not open on its own, then in that case the user is required to select “Payments” on the “MakeDeposits” window.
- Now, the user should hit ‘OK‘ button.
- Moving ahead, click on the ‘Deposit To list‘and then opt for the bank account for the deposit purpose.
- Once done with that, the user is required to type-in the date in the ‘Date field‘ and then if permitted enter any additional payments to deposit.
- The next step to be performed by the user is to click on ‘Print‘ option so that the user could have a hard copy of deposit slip.
- The last and final step is to hit ‘OK‘ so that transaction could be saved and after that take the slip to the bank and deposit the funds into the account.
The user can make the best use of the Un-deposited Funds account, in case the company accepts the transactions all the day by cheque or cash and later on deposit them to the bank in a single trip. Companies that accept only credit cards as payment option, they deposit one transaction at a time straightforward to the bank account, and other online payments basically do not use the Undeposited Funds account.
If you are not using undeposited funds account just because of the unawareness of the procedure to use it, then reading this article will help you to make the best out of it. However, if any of your queries remained unanswered regarding undeposited funds account, then do not hesitate in discussing it with our QuickBooks Online Support team.
Simply make a call at our toll-free number i.e. +1-888-300-3913, and our experts and certified QuickBooks professionals will be there to provide you proper support in a single call. Hope this article will be helpful for you. Thanks for your visit. Love to see you soon here again.