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 trust paid invoice payments and deposits into undeposited funds instead of the operating or IOLTA bank accounts. Why use undeposited funds vs. depositing directly into your bank account? Read on to learn more.
Learn How to Enable Undeposited Funds
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.
1. Place Funds in the Undeposited Account
To begin, you will need to be in QuickBooks Online to record a payment in Undeposited Funds. Once you mark Receive Payment, you can put the payment in the Undeposited Funds Account.
2. Go to Bank Deposit
When you are ready to begin making your lump deposits, go to + New and choose Bank Deposit from the menu:
2. Check the Deposits to Submit
Once you have received your checks and entered them as undeposited funds, now you can utilize the undeposited funds to record them as one lump sum. 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:
3. Select the Correct Account
Before you save your payment, make sure you check the correct bank account in which you want to deposit the payments:
6. Click Save
Click Save to save your changes.
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.
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.