Bank Deposits in Quickbooks

If you use Quickbooks, you may be familiar with the Undeposited Funds feature. It is confusing, but I will explain it.

When you are not using the feature, what will happen is each deposit that you enter will be for 1 customer with 1 or more invoices and you will see 1 deposit amount in the checking register. And when you reconcile the checking account register, you will see that 1 individual deposit. You may also see other individual deposits and need to combine the amounts to match the deposit you see on your bank statement. For instance, you may make a deposit at the bank that includes 3 checks or payments from your customers, all added together to make 1 total amount. Those 3 will show up in the checking account register as 3 separate deposits, as well. You would need to add the 3 together to match up to the deposit shown on your bank statement and mark off all 3 to clear them.

Now, if you receive and deposit 20 payments on the same day, this procedure for reconciling individual deposits becomes more difficult. When you use the Undeposited Funds feature, you will enter your deposits one at a time, just as in the above example. But this time, the deposits do not show up in the checking register at all. When you are ready to take your deposit to the bank, you will go to Record Deposits and enter the date of the deposit and then a list will pop up showing all the deposit amounts that you entered but have not yet deposited, hence the term Undeposited Funds. You will place a checkmark on each one you want to include on this deposit and save it. Then you are taken to the Make Deposits window to finish entering your deposit details. It shows up in the checking register as just one deposit amount. That saves you from having to add so many together when you are reconciling the bank account.

Maybe it is stating the obvious, but it is important to deposit the exact payments that you have entered in the Make Deposits window. Don’t add another payment or remove one after you have entered the Make Deposit. It has to match what you deposit at the bank.

The choice of whether to use the feature of Undeposited Funds is up to you. It is set as a default when you first use Quickbooks, but it can be changed. If your business frequently receives multiple payments over the course of a few days, then I would recommend you use the Undeposited Funds feature. If you only get a few payments per month, then I would not use it. You can change it at any time, but it will apply to every deposit procedure until you make a change to it.

If you don’t want to use it, go to Edit, Preferences, Sales & Customers, Company Preferences, and deselect it. Then on the Receive Payments window, you will see a box labeled, Deposit To and you will need to change that selection from Undeposited Funds to the bank account where you normally deposit your funds. Once you make these changes, they remain changed until you change them again.