What is Undeposited Funds? What does it mean and why should you use it? Good questions!
When you record a Payment in QuickBooks, the receivable is wiped out, and the amount goes into an account called Undeposited Funds. When you then MAKE DEPOSIT from your Bank menu, you see on your bank register the account Undeposited Funds. “Why does it say that,” you ask. “I put it in the bank!”
Yes, you did. It’s an unfortunate account name. I would prefer they had named it Desk Drawer. Consider this: Five customers owe you money, and all five of them write you a check. You record the first payment, but you know you aren’t going to the bank today, so you put the check in your desk drawer. Then you record the next, and so on.
Tomorrow, when you are ready to go to the bank, you reach into that drawer and take out all five checks at once. Now you are ready to make a deposit.
From the Bank menu, choose Make Deposit. You should then see a box with all five payments. Click each one, and all five go into the bank TOGETHER.
Why is this important? Because at the end of the month when you get your bank statement, that deposit is going to be listed as one number. You don’t want to have to hunt around to find the five transactions that add up to that number. By using Undeposited Funds, QuickBooks is telling you, “Here are the five checks you put in your desk drawer and took to the bank all at once.”
Make sense now? If not, give us a call. We can help you to better understand, or we can do it for you!