Undeposited Funds and QuickBooks Online

undeposited funds

Undeposited funds and QuickBooks Online (and desktop) is probably the Number one problem I find in customer files when they invite me to view their records.   You may feel happy like this guy with all of the income showing.  And then look sad like the picture on the right, when you see the undeposited fund mess.  

Why is this?  It is probably because it is a QuickBooks "made up" account that no one really knows what it is for.  And to top it off with the confusion, if you signed up to QuickBooks Online (QBO) and entered your own chart of accounts, it does not come in as an account by default.  You have to add it to the file.  

Undeposited funds:  do I need to use it?

Well, not necessarily.  It really depends on how you enter your customer payments.  If you record invoices, receive payments and enter the payments to your bank one at a time (maybe depositing using the bank app on your phone), then you probably do not need to use this account.  Or if you use the QuickBooks Merchant services and online invoicing, this is handled automatically. 

Undeposited funds:  if the account is not in your books, how do I create it?

Go to Gear>chart of accounts>new>other current asset>detail type>undeposited funds

I do have the account, what is the flow?

Very simple:

  1.  Record the invoice (+invoice).  
  2. Record the customer payment (+receive payment).  
  3. In the "deposit to" space, put undeposited fund account.  
  4. Enter every payment that you are going to group and deposit into your bank today.  
  5. Next go to +deposit and select the checks that are in the group to go to the bank.  The total should match your bank deposit slip.

Undeposited funds:  I did not do it right.  How do I fix my past transactions?

The video below will be helpful.  If the deposits are in the check register and cleared because you downloaded them from the online banking, then you need to open each one of them and add the payments to the deposit and remove the generic line item to your income account.  See this other post on how to do that.  

If, like in the video, the deposits are hanging and you need to group the deposits and match them, then go from the review screen to the bank deposit screen (right click and open a separate tab or window) and do them one at a time.  Don't forget the most important thing....RECONCILE!

If you have any questions or would like to see a future video on another topic, please reach out to me on Facebook.

Lynda Artesani

Lynda Artesani is the president of Artesani Bookkeeping where she uses her expertise and organizational skills to help her clients thrive and become profitable. Lynda is a member of the Intuit Trainer Writer Network. She is an alumni member of the Intuit Advisory Board. Additionally, she is the first Expert Columnist for the QB Community forum. She is also a co-founder in a Facebook group called QB Community Live!