How to use Undeposited Funds in QuickBooks Online

You have received the customer’s payment. The invoice is paid. Yet the money is still sitting in Undeposited Funds in QuickBooks Online. What happens next?

Undeposited Funds holds customer payments until you record their bank deposit in QBO. It helps you combine several payments into the same total that appears at the bank, so you can follow the money from the customer to the bank statement. Intuit explains how the account works.

What Undeposited Funds means

Think of it as a holding tray for recorded payments waiting to be grouped into a deposit. Receiving a cheque and taking it to the bank are separate events. QBO needs a record of both.

The account is part of your bookkeeping; recording a Bank deposit in QBO does not send money to your bank. And a balance here does not necessarily mean the cash is still on your desk. You may have deposited it in real life and missed the corresponding step in QBO.

When to use it

Undeposited Funds is especially useful when several customer payments appear as one bank deposit. If you receive three cheques and deposit them together, grouping those payments in QBO makes the bank comparison easier.

For a payment that will appear as its own deposit, you may record it directly to the appropriate bank account instead. If you use QuickBooks Payments, check the payment and deposit records it creates before entering anything manually. Intuit’s payment guidance covers these choices.

A simple example with three payments

Fictional teaching example in CAD: Cedar Bend Plumbing receives three payments against existing invoices and deposits the cheques together. There are no fees or currency conversions in this example.

Each payment is recorded against its invoice with Deposit to set to Undeposited Funds. Once the cheques are deposited, the bookkeeper creates one $1,000 Bank deposit in QBO and selects those three existing payments.

The bank account now has one $1,000 deposit to compare with the bank statement. If these were the only payments waiting in Undeposited Funds, that account’s remaining balance would be zero. The deposit moves the recorded payments into the bank account; it does not create another sale.

Prefer reading? Continue with the written walkthrough below. The guide explains how to record a payment, group it into a deposit, and match the bank feed without entering the same money twice.

Step 1 Record the customer payment

For an existing invoice, open + New or + Create, then Receive payment. Choose the customer and the invoice being paid. Check the date and amount, set Deposit to to Undeposited Funds, and save.

If the customer pays at the time of sale and there is no existing invoice, use a Sales receipt instead. Choose Undeposited Funds when that payment will be grouped with others. Use the appropriate record for the sale; do not create both forms for the same payment. Intuit’s instructions for recording payments.

QBO menus can differ by region and interface version. If the account was renamed, check its Detail type in the Chart of accounts for Undeposited Funds.

Step 2 Record the bank deposit

Once you have the actual deposit details, open + New or + Create, then Bank deposit.

• Select the bank account that received the money and enter the deposit date.
• Select only the existing payments included in that particular deposit.
• Compare the total with the deposit slip or other bank evidence, then save.

Create a separate QBO deposit for each actual deposit. Select the payments already listed; entering them again as new income under Add funds to this deposit can count the same receipts twice. Intuit’s Bank deposit instructions.

Step 3 Match the bank feed

When the deposit appears in Bank transactions, compare it with the Bank deposit already recorded in QBO. Check the amount, account, date, and supporting details before confirming the match.

For the example above, the downloaded $1,000 deposit belongs with the existing $1,000 Bank deposit. Adding it as new sales income would create another record for money already entered.

If QBO does not suggest the correct deposit, use Match, Find match, or Find other match, depending on your interface. Investigate differences before posting. Intuit’s bank matching guidance.

Matching helps prevent duplicates. You still need to reconcile the bank account to its statement for the period.

When the deposit is reduced by fees

A processor might collect $1,000 from customers and send $970 to the bank after a $30 fee. Keep the full customer payments and account for the fee separately.

For a deposit you are recording manually, Intuit describes adding the fee as a negative amount against the appropriate fee expense account on the Bank deposit. In this fictional example, $1,000 less $30 gives the $970 deposit. First check whether your payment integration has already recorded the deposit or fee. Intuit’s guidance on fees.

What to check when the balance looks wrong

Start with Chart of accounts, find Undeposited Funds, and choose Run report. Set the date range wide enough to include older items. Intuit’s Undeposited Funds report instructions.

For each unexplained payment, trace the customer record to the actual bank deposit. A useful review asks:

• Is the money still waiting to be deposited? A recent balance may be expected.
• Did it reach the bank? Look for the deposit record and check which payments were selected.
• Was the bank-feed deposit added as new income? Compare that entry with the original payment before correcting a possible duplicate.
• Was the payment recorded elsewhere? Check its Deposit to account and whether it belongs to an existing deposit.
• Are you looking at the right currency? QBO’s Bank deposit window shows payments for one currency at a time when multicurrency is enabled.

If a payment is missing from the Bank deposit window, its original record and previous deposits are the first places to look. Intuit’s missing-payment checks.

Avoid a blanket adjustment just to make the balance zero. Identify the affected payments and deposits first. For items in a reconciled or closed period, agree on the correction with the person responsible for reviewing the books.

A quick checklist before you finish

• The customer payment is recorded once and applied to the right invoice or sale.
• Each Bank deposit contains the payments that actually went to the bank together.
• Any withheld fee is supported and recorded once.
• The downloaded bank transaction is matched to the appropriate existing record.
• The remaining Undeposited Funds balance can be explained payment by payment.

The goal is a trail you can follow: customer payment, bank deposit, bank statement. When those records agree, Undeposited Funds has done its job.

Explore the available articles for related bookkeeping explanations.

Source guidance is for Canadian QuickBooks Online and was checked October 5, 2026. All example records are fictional. Menu labels and payment automation may differ by region, plan, and setup.