The Undeposited Funds Account in QuickBooks Online

By Elaine Marmel

If you receive more than one customer payment on any given day, you’ll find the Undeposited Funds account in QuickBooks Online (QBO) a convenient way to handle the money that comes into your business. If you take several checks to your bank on a given day and deposit all of them as a single deposit, most banks typically don’t record the individual checks as individual deposits.

Instead, the bank records the sum of the checks as your deposit — pretty much the same way you sum the checks on the deposit ticket you give to the bank teller.

“And why is this important?” you ask. This fact is important because, when you receive your statement from your bank, you need to reconcile the bank’s deposits and withdrawals with your own version of deposits and withdrawals.

If you track each customer payment you receive as a deposit in the bank, then your deposits won’t match the bank’s deposits. And, if you don’t use the Undeposited Funds account — and instead record customer payments directly into your QBO bank account — your deposits definitely won’t match the bank’s version of your deposits.

Enter the Undeposited Funds account in QBO, which acts as a holding tank for customer payments before you’ve prepared a bank deposit slip.

If you place customer payments in the Undeposited Funds account, you can then use the Bank Deposit feature in QBO to sum up the payments you receive and intend to deposit at your bank simultaneously — and, if you don’t go to your bank daily to make deposits, there’s no problem.

QBO records, as the deposit amount in your QBO bank account, the amount calculated in the Bank Deposit window, which will match the amount you actually deposit at your bank. Then, your bank reconciliation process becomes quick and easy — okay, maybe not quick and easy, but certainly quicker and easier than if you were trying to figure out which customer payments made up various bank deposits.