QuickBooks – The Undeposited Funds Account – Demystified
What is the undeposited funds account? I have witnessed firsthand CPA’s who have been completely frustrated with this account. They don’t get it – and some of them are pretty smart!!! Well I’ve learned to break things down simply in order to get them. Perhaps that is why I am able to teach things – I break them down simply, so here goes. The undeposited funds account consists of “funds” or “money” which have not yet been deposited. The implication of course being that I have received them. So I often explain to clients that this account and whatever balance is may show should literally represent the checks sitting on your desk which you have not yet taken to the bank.
Why do we need this account?
When I go to the bank I deposit several checks at once. Then the bank gives me a receipt for the total. This total is what shows up on my bank statement next month. I want QuickBooks to show me the same total in the check register, rather than having the individual checks. Especially when I go to reconcile the statement, if I can’t group the checks as a lump sum deposit I will need to manually sit there adding up the check amounts from the check register to hopefully arrive at the total on the bank statement. A needless waste of time!
How does the undeposited Funds Account help?
The undeposited funds account helps by allowing you to group customer payments together in a “box” so to speak. Then when you go to make a deposit you can check off exactly those payments which you are depositing today, leaving behind any that you will be holding. This way you can tie out to the bank AND QuickBooks lets you print the deposit slip and/or deposit summary showing you exactly what makes up that deposit. Exciting stuff! Really it is! Watch it in action in the video below..
So what if your undeposited funds account shows a balance, but there are no checks on your desk?
Never fear, Nerd is here – Watch the video and I am going to show you exactly how to find out what is in that balance, leaving out the entire history of all of the transactions which have been received and deposited.
Enjoy the web cast:
Video Tutorial - Click to watch
Thanks for the clear and detailed web cast to explain Undeposited Funds and troubleshooting that account.
One thing to add: when the register is used to post deposits, there is no pop-up box with pending payments to deposit, which increases the likelihood of neglecting to pull in the payments.
Therefore, when I train a new client, I advise them to use the Make Deposit form, instead of the register, to post the transactions. This eliminates this, and other, problems with QuickBooks postings.
I hope this helps,
Laura
Thanks! Great point. I don’t even show clients that recording transactions in the register is an option. I always instruct them to make deposits and write checks in the full form so that you can include all of the details. Even though it is ‘possible’ to enter things that way, I always instruct people that they should never enter directly in the register no matter what the transaction.
I agree with the Nerd. Never let the client use the register as an option. Undeposited funds is actually much easier once the client understands the purpose of it.
Thanks Travis!
Hello, I left a comment on your ‘You Tube’ presentation. As I am assisting a friend with getting started on Quickbooks. We have entered all 2010 information and what I did with the daily sales for each day is enter them in payments received. If you look at the A/R report, it shows all negative amounts for the payments received. Should we enter to ‘make deposits’ instead? Do we need to worry about the negative amounts? How will it impact the PnL statements? Thank you!
Go back and watch the video again
After entering the payments, you have to make the deposits. When you receive payments they go into “Undepostied Funds”. Then you have to click “Banking – Make Deposits” to complete the transaction by checking off all of the payments that were deposited together at the bank. If each payment was deposited separately then you have to repeat the process for each payment. Also – if the A/R report is negative it is because you never invoiced the client. This has to be done so you can apply the payments to the invoice. Then your A/R will ’0′ out. Usually this is done first, before receiving the payments.
Is is possible to obtain a hard copy of the undeposited funds account demystified? I am especially interested in how to correct the duplicate entries. Thank you
Do you mean the video or the QuickBooks file used in the video? I am also available for one on one training if you think that would be more helpful. (866) 945-8070. I can do it remotely and record our private session for you to review as many times as you need afterwards. This offers you the specific context of the issues you are having with your own QuickBooks file.
I am only looking for the specific steps to delete the “forced entry” and to deposit the correct entry into the bank account.
So what is it you would like a “hard copy” of?
My bookkeeper recommends that I use the transfer funds feature, not make deposits. When I take the checks to the bank I transfer the amount into the register from the un-deposited account. So when I look at the transaction list for the undeposited account, none of them are cleared! So I can’t go there to fix the problem. Also, my undeposited account is created from an iif file that I import from a third party program I use for my receivables. The amounts are batched by CC, check and cash, not by individual customer payments. I seem to often have a negative balance. Any thoughts?
I can’t imagine why your bookkeeper would have you using transfers to get money from undeposited funds account to your bank account. Using the transfer funds feature sounds like it would create a mess. QuickBooks will normally automatically reconcile undeposited funds for you based on using the Make Deposit feature. The problem with using transfers is you have no place to indicate WHO’S (ie which client) money is now being deposited. As far as the 3rd party program processing via payment type, all you can really do with that is match up your deposits. So it really isn’t even useful to use it because in QuickBooks I assume you want to track your sales by customer. Their payments are supposed to be grouped together in undeposited funds and then you group the payments from within undeposited funds by payment type because that is how the money will actually transfer into your account. There are other solutions that will handle this entire process for you so that when you sync with QuickBooks there is no messy iif file to deal with. You upload your item list to the web and everything is posted for you from the sales receipts to the deposits themselves, all grouped based on the way they will actually fund.
Let me know if you need any help with this and we can set up an appointment.
I have my undeposited funds acc, and when I went to go and reconcile, I have a deposit that is not on my bank statement. When I pull up make deposits, all I get is the undeposited detail. The video wasn’t clear enough for me, because I am still confused. I have a deposit in undeposited funds that I don’t want grouped together because it hasn’t been deposited on bank statement, but I don’t know how to get it out of undeposited fund total. Is there another video. Searching for 2 hours now trying to get reconciled.
Thanks for any help in advance.
It sounds like you recorded a payment and then the deposit for an amount that never went into your bank account. So the real question is, where is that money or did you ever receive it? If you haven’t deposited the funds yet then delete the deposit and the amount will remain in undeposited funds until it is deposited (and you record it). While you’re in the “Make Deposits” screen showing the payment coming from undeposited funds, click the “History” button. See screen shot here: Make Deposits History Button This will let you see all of the payment details so you can research this and find out if you ever did receive the money and if so where it went. If you never did get the money then simply delete your deposit and then delete the customer payment.
“..but I don’t know how to get it out of undeposited fund total.”
When you receive a payment from a customer it goes into the undeposited funds total.
When you record a deposit and include that payment in a deposit (whether by itself or grouped) it comes out of the undeposited funds total.
So if a payment has not been deposited then it will stay in the undeposited funds total. The only way to get an amount out of undeposited funds is to either delete the payment or record the deposit.
I watched your video twice. The problem we have with our undeposited funds is that our balance on the balnce sheet is a negative number. I will try using the filter system to see what I can find. In you scenario if I understood the funds deposit was neve actually made? and then you fix that when you deleated the line? So in the case of a negative number does that mean we deposited it twice?
oh boy.. where do I start.. with the undeposited funds acct. I watched the tutorial which was very helpful.. Just not in my situation! We had a deposit that was deleted with about 6 payments that were attached to this deposit for the amount of $8419. one of the checks bounced. I went in and deleted the check and noticed I messed up the books so the treasurer had to delete reconciliations and go back and reconile. She noticed the deposit for 8419 and could no match numbers or payments that equalled the amount so she manually entered the amount into the deposits and reconciled the books. The payments were left in undeposited funds that still do not equal the amount of 8419. Anyway to fix the mess I created? Also we had a deposit that was stolen. It was over $6000 in deposits. I went through and had customers stop payments on their checks and I deleted the deposit. The cash that was received as well as the cashiers checks could not be replaced so I left them in the accounts and in the undeposited funds so that we were able to see exactly what had gone missing. How do I clean this up out of the undeposited funds acct? Thanks for your time….
Ahh! I’ve seen this. It sounds like some transactions have gone corrupt. When I looked at a situation like this at the beginning of the year there were payments that were somehow showing up twice (even though they were only entered once). There are 2 ways you can go about fixing this. One is to use a data repair service like Nancy Gomez – http://www.bottomline-sb.com
The other way would be to isolate each transaction that is causing the problem, delete it and re-enter it.
This sounds like something I would need to be looking at your books to really help you with. You can sign up for a session with me on my QuickBooks Training site at http://www.QuickBooksAnswers.Info and I can look at your books with you (remotely) and then we can look at each situation and fix them.
Hi. I watched and paused and tried to follow step by step and I’M LOST! I have nearly $48,000 in Undeposited Funds! You moved a bit fast in the video and your screen was different so it threw me off. My questions are: #1 Where do I click to get to the point where I make a match (the payment on the actual report?)? #2 What if the funds show up On the report but not in the ‘Make Deposits’ box?
#3 Is it ok that the dates don’t match? When I deleted the line (as you said), then made the deposit, the balance didn’t change. What am I doing wrong?….LOST!
It sounds like I would really need to see what you are looking at firsthand. If you would like to schedule a session to get my direct help you can do that at http://www.QuickBooksAnswers.Info this way I can go through it 1:1 with you at a pace that works for you and make sure you understand it very clearly.
i have two separate receivables my main account goes to undeposited funds. in error some funds from second receivable went to the same undeposited funds instead of the separate account i had set up. how do i move transactions from undeposited funds individually. i cannot use a journal.
Your answer is coming very soon in a video I’ve already recorded.