Undeposited Funds Account

Managing the Undeposited Funds account

The Undeposited Funds account acts as a holding bucket for money you have received but haven’t yet taken to the bank. It ensures your bank records in QuickBooks Online match your actual bank statements, especially when you deposit multiple payments (checks and cash) at once.

How the workflow works

The standard payment process involves two steps:

1. Receive the payment: When you receive a customer payment via an Invoice or Sales Receipt, the money lands in the Undeposited Funds account. It does not go directly to your bank account yet.
2. Make the deposit: You group these payments together and record the actual bank deposit.

This workflow ensures that when you reconcile your bank account, the single deposit total in QuickBooks matches the single deposit total on your bank statement.

Depositing funds correctly

To move payments from Undeposited Funds to your bank account:

1. Select + New and then Bank Deposit.
2. Important: In the upper-left corner, ensure the “Deposit to” field is set to the actual bank account where you are depositing the money.
3. Do not change this field to “Undeposited Funds.” If you select Undeposited Funds here, the list of available payments will disappear.
4. Once the correct bank account is selected, the list of payments waiting in Undeposited Funds will appear at the top of the screen. Select the payments you are including in this deposit.
5. Select Save and close.

Troubleshooting common issues

Payments are not showing up in the Bank Deposit screen

If you cannot see your payments in the list to be deposited:

• Check the “Deposit to” account: As mentioned above, ensure the upper-left field is set to your Bank Account, not Undeposited Funds.
• Converted files: If you converted your data from QuickBooks Desktop, you may have duplicate Undeposited Funds accounts. QuickBooks Online requires the use of its specific, generated Undeposited Funds account. You may need to merge the old account with the new one or move the payments to the correct account.
• Review the source: Ensure the original payment was received correctly (using Receive Payment or a Sales Receipt) and was not posted directly to the bank account or via a Journal Entry.

Income is doubled or incorrect

If you see duplicate income or incorrect postings:

• Avoid Journal Entries: Do not use Journal Entries to move money from Undeposited Funds to the bank. This bypasses the correct accounting links and often causes income to be counted twice. Always use the Bank Deposit feature.
• Check the deposit detail: Open the bank deposit transaction in your register. Ensure the “Deposit” account is your bank account and the source is the Undeposited Funds payment.

Handling QuickBooks Payments

If you use QuickBooks Payments (merchant services), transactions often flow into Undeposited Funds automatically. To clear them:

1. Go to + New > Bank Deposit.
2. Select the appropriate payments.
3. Save the deposit.
4. When you download transactions from your bank, use the Banking or Transactions menu to match the downloaded bank deposit to the QuickBooks deposit record you just created.

When to bypass Undeposited Funds

If you deposit every single payment immediately and never combine multiple checks into one bank deposit, you can turn off the Undeposited Funds preference.

• Go to the Settings gear icon.
• Select Account and Settings.
• Choose the Sales tab.
• In the “Products and Services” or “Sales form content” section, find the preference for “Deposit to” and change it from Undeposited Funds to your specific bank account.

Note: If you disable this, payments will post directly to the bank account. You will not be able to group payments together for a single deposit.