Undeposited Funds in QuickBooks: What It Is, How to Clear It

Undeposited Funds in QuickBooks is a built-in holding account that temporarily stores customer payments before you combine them into a single bank deposit. When you receive a payment and choose Undeposited Funds (newer QuickBooks Online calls it Payments to deposit), the money waits there until you record the actual deposit that hit your bank. You clear it from New, then Bank Deposit, by selecting those payments and grouping them so the total matches the bank's deposit slip.

The whole point of Undeposited Funds is to let you bundle several payments into one deposit that equals the lump sum the bank shows, so the bank feed line matches and your reconciliation balances. Payments get stuck there when you record the payment but never make the deposit, which is why the balance grows and your books look off. If you also need older deposits that the bank feed never pulled in, convert the PDF statements to a .qbo file with the tool above and import them, so every deposit is on the books before you reconcile. Here is what the account is, why it fills up, and how to clear it in QuickBooks Online and Desktop.

What is Undeposited Funds in QuickBooks?

Undeposited Funds is a default account QuickBooks uses to hold customer payments you have received but not yet deposited at the bank. It works like the drawer where checks and cash sit before you take them to the bank. The money stays there until you record a bank deposit, at which point it moves out of Undeposited Funds and into your bank account.

What does Undeposited Funds mean in QuickBooks?

It means you have recorded that a customer paid you, but you have not yet recorded the deposit that moved that money into your bank account. The payment is logged as income and sits in a temporary holding account. Recording the bank deposit is the second step that clears it and matches your real bank activity.

What account type is Undeposited Funds?

Undeposited Funds is an Other Current Asset account. It is not a bank account, so you do not reconcile it against a bank statement. You clear it by depositing the payments it holds. Because it is an asset, a growing balance shows money you have recorded as received but never moved into a real bank account in QuickBooks. Physical cash works differently: a QuickBooks petty cash account uses the Bank type with a Cash on hand detail type, so you can reconcile it against the drawer.

Why does QuickBooks use Undeposited Funds?

QuickBooks uses it so you can group multiple payments into one deposit that matches what the bank records. If three customers pay you and you deposit all three checks together, the bank shows one combined amount. Holding the payments in Undeposited Funds first lets you create one matching deposit instead of three separate lines the bank will never show.

How do I clear Undeposited Funds in QuickBooks Online?

Go to New, then Bank Deposit. Under Select the payments included in this deposit, check the payments sitting in Undeposited Funds that make up your real bank deposit. Confirm the total equals the amount the bank received, pick the correct bank account and date, then Save. Those payments leave Undeposited Funds and land in your bank register.

How do I record Undeposited Funds in QuickBooks?

When you receive a payment, use Receive Payment for an invoice or Sales Receipt for a payment with no invoice, and set Deposit to as Undeposited Funds. That records the income and parks the payment in the holding account. Later you create a Bank Deposit to move the grouped payments into your bank, which completes the cycle.

Why are my Undeposited Funds not showing up when I make a deposit?

If a payment does not appear in the Bank Deposit window, it was usually sent straight to a bank account instead of Undeposited Funds, or it was already included in another deposit. Open the payment, check the Deposit to field, and change it to Undeposited Funds. It will then appear in the list of payments waiting to be deposited.

How do I get rid of an old balance in Undeposited Funds?

Open the Undeposited Funds register or run a Balance Sheet and click the balance to see what is stuck there. For real payments you actually banked, create the matching Bank Deposit to clear them. If a payment is a duplicate of a deposit already in your bank, fix the source entry rather than forcing a deposit, so you do not double-count income.

How do I delete undeposited funds in QuickBooks?

You do not delete the Undeposited Funds account itself, since it is a built-in account QuickBooks needs. To clear a stuck balance, you delete or correct the individual payments inside it. For a real payment, record the matching Bank Deposit to move it out. For a duplicate or test entry, open it from the Undeposited Funds register and delete that single transaction, which removes it without touching the account.

Is Undeposited Funds an asset on the balance sheet?

Yes. Undeposited Funds appears on the Balance Sheet as an Other Current Asset, listed near your bank accounts. A balance there represents customer payments you have recorded as received but not yet deposited in QuickBooks. If the number looks too high, click it on the Balance Sheet to drill into the exact payments waiting, then clear each one with the bank deposit it belongs to.

How do I find Undeposited Funds in QuickBooks?

Go to Settings, then Chart of accounts, and look for the Undeposited Funds account. Select View register to see every payment waiting there. You can also run the Balance Sheet report and click the Undeposited Funds amount to drill into the exact transactions making up the balance.

How do I move Undeposited Funds to my bank account?

You move them with a bank deposit, not a transfer. Create a Bank Deposit, select the payments held in Undeposited Funds, and choose the bank account they were deposited into. Saving the deposit moves the money out of the holding account and into the bank register, where it can match the bank feed line.

How do I clear Undeposited Funds in QuickBooks Desktop?

In QuickBooks Desktop go to Banking, then Make Deposits. The Payments to Deposit window opens with everything held in Undeposited Funds. Check the payments that make up your actual bank deposit, click OK, confirm the bank account and date, then Save. This is the Desktop equivalent of the Bank Deposit screen in QuickBooks Online.

Should I use Undeposited Funds or deposit directly to the bank?

Use Undeposited Funds when several payments are deposited together as one bank transaction, which is the common case. Deposit directly to the bank only when a single payment lands as its own separate line, such as an ACH or card payout. The rule is simple: group payments the way the bank groups them so the deposit matches.

Why won't my reconciliation balance because of Undeposited Funds?

Reconciliation breaks when payments sit in Undeposited Funds but the matching bank deposit was never recorded, or when a deposit was entered twice. Clear the holding account by recording each real deposit once, and remove any duplicate the bank feed added. When every banked deposit is recorded a single time, the difference usually drops to zero.

Does the bank feed put payments in Undeposited Funds?

No. The bank feed brings in the deposit as it appears on your statement, not as Undeposited Funds. The trick is to match that downloaded deposit line to the Bank Deposit you create from Undeposited Funds, rather than adding it as new income. Adding it separately double-counts the money and is a common cause of an off reconciliation.

Clearing Undeposited Funds correctly is what makes a clean reconciliation possible, so pair this with our guides to reconciling bank statements in QuickBooks and fixing it when your bank balance doesn't match QuickBooks. For the deposit side, see how to record a deposit in QuickBooks and how to match transactions in QuickBooks so a downloaded deposit links to the one you created. To backfill deposits the feed never reached, learn how to import old bank statements into QuickBooks. If your bookkeeping also lives in spreadsheets, you can convert bank statements to Excel, turn a CSV bank file into a .qbo, or extract invoice data to Excel to reconcile what customers actually paid.