Think of the Undeposited Funds account as an envelope or desk drawer where you keep checks until you take them to the bank. If you receive more than one check or payment in a day, you may want to group them all into one deposit. You want to enter those transactions so that your Quickbooks Online Bank Register matches your Bank's monthly statement.

LeanLaw introduced the option to deposit invoice payments and trust deposits into undeposited funds instead of directly into the operating or IOLTA bank accounts. Why use undeposited funds vs. depositing directly into your bank account? Read on to learn more.

To learn how to enable depositing funds to undeposited funds vs. your bank account, please go to Enable Undeposited Funds. To learn more about the purpose of undeposited funds from QuickBooks itself, please click here.

There are four scenarios that will transfer deposits into the Undeposited Funds account:

A. When you receive a regular invoice payment (such as a payment by check) that you record in either LeanLaw or QuickBooks Online

B. When you apply a trust payment against an invoice from the Manage Invoices area

in the Billing section of LeanLaw

C. When you record a trust deposit

D. When funds (either trust deposits or invoice payments) are received from Gravity Legal.

When you are ready to begin making your lump deposits, go to + New and choose Bank Deposit from the menu:

Important Note: There are two "types" of payments that you will see:

The ones that are marked "journal" are trust deposits and should be deposited into the trust/IOLTA account.

The ones that are marked "payment" are invoice payments and should be deposited into

the Operating account.

Once you have recorded your payments, now you can utilize the undeposited funds to group them together and record them as one lump sum to match your actual deposit. When you have all the payments entered and you are ready to actually deposit them in your bank, use Bank Deposits. Check the deposits that you want to submit:

Again, be sure to not mix "payments" and "journal" types as they go into separate bank accounts.

Before you save your payment, make sure you check the correct bank account in which you want to deposit the payments:

Click Save to save your changes. This will record the deposit onto the checking account

register of the account that you selected.

Note: Certain reports or registers may show the deposited amount listed under Undeposited Funds which, is used to denote the last account the funds were in before being deposited. To see what funds are sitting in Undeposited Funds that have not yet been deposited to the bank account, go to your Bank Deposits to see the Undeposited Funds account via your Balance Sheet from the Reports menu.

"I don't quite understand the undeposited funds account."

The purpose of undeposited funds in LeanLaw is to try to replicate in your QuickBooks Online Company what you're actually doing daily so when your bank statement arrives, the amount of the deposit matches the deposit in your QuickBooks Online bank register. If you use bank feeds, you will be able to easily "match" the incoming deposit to what has been recorded.

The Undeposited Funds account in QuickBooks Online serves a special function – it’s a special temporary account that QuickBooks uses to hold payments received from invoices before you deposit them into in the bank.

​