QuickBooks Tip: Use Undeposited Funds

What is Undeposited Funds?
Undeposited Funds is used to track customer payments. It groups payments together so you can match the bank deposits shown on your statement.

How do you use Undeposited Funds?
First, you must set up Undeposited Funds in QuickBooks. Go to Edit > Preferences > Payments > Company Preferences Tab > and check the box that says “Use Undeposited Funds as default deposit to account.”

When receiving a payment go to Customer > Receive Payment. The payment will be recorded in the Undeposited Funds account.

When making a deposit go to Banking > Make Deposits. A pop-up box will appear that includes any payments that have been posted to Undeposited Funds. Check each of the payments that will be included in the deposit. Select OK. If you have any additional payments to add to the Deposit, add them until the total deposit in QuickBooks equals the total you are depositing.

What causes incorrect balances in Undeposited Funds?

1. Recording missing deposits directly to the bank account because you are unaware they are already recorded in Undeposited Funds.
   What can I do to avoid this? Make sure you know whether or not Undeposited Funds is set up as the default deposit to the account. We recommend you use it. However, if you decide the account doesn’t serve a purpose you should change where your payments are deposited.
2. Not using the pop-up list of Undeposited Funds when making a deposit.
   What can I do to avoid this? Make sure to review the pop-up box carefully when making deposits. Before recording deposits directly into the bank account, review Undeposited Funds for any missing amounts.