QuickBooks Tip: Understanding Undeposited Funds
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Has a balance in the Undeposited Funds account on your balance sheet ever caused you to double-post customer payments or overstate cash? If so, you aren’t alone. This feature can be confusing to QuickBooks users who may not realize where the balance is coming from.
When used correctly, the Undeposited Funds feature can simplify how you record customer payments and reconcile bank deposits that are comprised of multiple customer checks.
Where are Undeposited Funds coming from?
When you record the receipt of customer payments, QuickBooks puts those payments into Undeposited Funds, treating the folder like a holding bin for incoming check and cash payments that have yet to be deposited into your bank account.
QuickBooks doesn’t post these payments directly to your bank account because it knows there may be a delay before you deposit them. When they are deposited, QuickBooks allows you to pull them together into a single cash deposit on your bank register.
If done properly, the Undeposited Funds balance will zero out to reflect that you no longer have a stack of checks in your possession. And, when it’s time to reconcile your bank accounts, you’ll have the ease of tying the lump sum bank deposit to a single total on your bank register, rather than struggling to track down and add up multiple checks and cash receipts to match the total on the deposit slip.
Steps to record Undeposited Funds
The following are six steps to simplify using the Undeposited Funds feature in the desktop version of QuickBooks:
- Begin by entering new customer payments within the Receive Payments As the checks come in the door, your Undeposited Fund balance will grow, reflecting the fact that you have multiple checks awaiting deposit to the bank.
- When you’re ready to prepare a deposit slip, head to the Banking dropdown menu and select Make Deposit.
- A new window titled Payments to Deposit will appear, displaying all of the previously-received customer payments that are available for deposit.
- From here, select the individual checks or cash amounts that will comprise your single bank deposit. If you are making multiple deposits, then only select the payments that correspond to each individual deposit slip.
- Once you have selected all of the desired customer payments, hit OK to be shown the pre-filled deposit slip, which lists all of the underlying checks and/or cash amounts per customer. This is also the point at which you could input other cash or check amounts that you’re including in this deposit.
- Once all of the lines on the pre-filled deposit slip agree to the amount being deposited to the bank, click Save and Close.
To simplify the deposit process, Intuit provides printable deposit slips. Once you have completed your deposit in Quickbooks, you can print the deposit slip, which can be customized with your company’s name, address, and banking information. Ordering printable deposit slips is easy on the Intuit marketplace.
If you would rather have payments automatically post to a bank account than to an Undeposited Funds balance, turning off the feature is simple.
- Go to the Edit dropdown menu
- Select Preferences > Payments > Company Preferences > Receive Payments
- From here, uncheck the box that says Use Undeposited Funds as a default ‘deposit to’ account
If you’ve used the Undeposited Fund feature in the past but have gotten off track, you may need to clear out the holding bin to remove dated, previously-deposited customer payments from the list, but you should contact your CPA before you do.
Contact me or another one of Kaufman Rossin’s Certified QuickBooks ProAdvisors to learn more!
