How to Clean Up Undeposited Funds in QuickBooks Online

I appreciate you joining the thread with your bank feed inquiry, Sarah. See how other businesses slashed 20% back-office costs in 2024. Let’s look at them in more detail to get a better hold on how to work with the Undeposited Funds Account in QuickBooks. See our overall favorites, or choose a specific type of software to find the best options for you. You can also search by invoice number instead of customer name.

Posting each payment to the Undeposited Funds account and then recording the deposit in QuickBooks Online allows you to do this. 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. Using your deposit slip as a reference, combine the check and cash payments with a bank deposit. Deleting undeposited funds in QuickBooks requires careful consideration and accurate adjustments to ensure that all financial records remain consistent and transparent.

How To Use the QuickBooks Online Undeposited Funds Account

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. This not only promotes transparency and accountability but also aids in accurate cash flow management and budgeting. This process involves cross-referencing bank statements, invoices, and receipts to identify any discrepancies or missing transactions.

Use it to hold all payments you need to combine and group together. You’ll decide which account in QuickBooks to put the deposit into when you combine. Learn how to double declining balance (ddb) depreciation method put payments into the Undeposited Funds account before you combine them into a deposit. When you deposit the payments together at the bank, you record that in QuickBooks as well.

If you see any discrepancies, then you will need to add or delete items, as shown in the next steps. 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.

Your projects are processes,

1. 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.
2. In your case, it appears that you matched the payments with the bank deposit downloaded via Banking Feeds, which explains why the deposits on your bank statement were cleared.
3. The process  described in the previous section repeats for as many sales receipts as needed.

If you need to combine payments processed outside of QuickBooks Payments, follow the steps in the next sections. 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. Let’s say your customer sent you a check the definition of “traceable costs” for services rendered.

Sending invoices and recording sales receipts

However, the payment will not clear your bank until Jan. 2 of the next year, at the earliest. QuickBooks Online has a special account specifically for these funds in transit. 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 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. Record the payment received from your customer and place it into the Undeposited Funds account.

You received the check on the last day of the year, which happened to be a Saturday. 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. Ensure that the deposits shown in your Deposit Detail report remote bookkeeping services match your bank activity exactly.