For example, let’s say Willie’s Widgets paid you $300, Wally’s Whatsits paid you $750 and Whitley’s Whosits paid you $200. 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. With your deposit slip in hand, you can record a bank deposit and combine the payments in QuickBooks. All payments in the Undeposited Funds account automatically appear in the Bank Deposit window. While processing invoice payments outside of QuickBooks and receiving payments for an invoice, QuickBooks will put them into Undeposited Funds automatically.

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However, the payment will not clear your bank until Jan. 2 of the next year, at the earliest. 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. 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.

How Do I Avoid Undeposited Funds in Quickbooks?

If you see a balance in Undeposited Funds on your balance sheet, you need to investigate. Now, when you check the Bank Register for your checking account, you can see the deposit posted for the correct amount. Here’s what you need to know about QuickBooks Online’s Undeposited Funds account to keep your business accounting operations running smoothly.

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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. 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. When processing invoice payments through QuickBooks Payments for Desktop, QuickBooks takes care of everything and there’s no need to combine payments or move them to the Undeposited Funds Account.

1. Here’s how to put payments into your Undeposited Funds account before you combine them.
2. If you find that the deposit was posted straight to Income in the bank feed, un-reconcile the transaction, undo the entry and then match the transaction properly.
3. Since both transactions were dated on Jan. 29, the first thing to check for is a deposit in your Bank Register for $2,062.52 dated on or around Jan. 29.
4. It’s possible the deposit was posted straight to an Income account rather than matched to payments received.

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 find that the deposit was posted straight to Income in the bank feed, un-reconcile the transaction, undo the entry and then match the transaction properly. 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. The importance of this step becomes even more apparent in the next screenshot. As we know, reconciling is an integral part of your books and keeping them accurate.

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By resolving discrepancies promptly, users can ensure that their financial records are up-to-date and free from errors, ultimately contributing to a more organized and efficient accounting process. This step is crucial for maintaining the financial integrity of the business and preventing any potential errors that may arise from misrecorded or omitted deposits. In addition, reconciling bank deposits in QuickBooks helps in providing a clear and reliable overview of the company’s financial health, aiding in making informed business decisions. 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.

Proper reconciliation also plays a significant role in the implementation of effective financial controls, which are crucial for maintaining the integrity and trustworthiness of the company’s financial standing. One option to fix undeposited funds in QuickBooks is to create a bank deposit to accurately capture and allocate the deposits received from customer payments. This process what financial statement lists retained earnings entails cross-referencing the deposits shown in the QuickBooks system with the transactions listed in the online banking portal.

The process  described in the previous section repeats for as many sales receipts as needed. The payments you collect from the customers go to Undeposited Funds. Finally, you can see the number of payments in Undeposited Funds on the Record Deposits icon. Let’s look at how to record sales receipts and deposit the money you receive in QuickBooks.