Sticky Situations You May Not Know How to Handle Part 2

We've all been in the situation where you receive a customer payment but don’t deposit it to the bank right away, or you group multiple payments into one deposit. In QuickBooks, this results in funds going to “Undeposited Funds,” which confuses many users.

Why It’s Tricky: If not handled correctly, your bank reconciliation won’t match, and it may look like you received duplicate payments. You need to use the “Record Deposits” function to group and deposit funds correctly.

🧾 Scenario: You Receive a Payment But Don’t Deposit It Right Away

Let’s say you receive two checks from two different customers and take them to the bank together. QuickBooks needs to show that the deposit was made as a grouped deposit (not as two separate payments), or your bank feed and reconciliation won’t match.

✅ Step-by-Step Process in QuickBooks Online

STEP 1: Receive the Payment

1. Click the “+ New” button (top left).

2. Select “Receive Payment.”

3. Choose the customer name.

4. Under Outstanding Transactions, check the correct invoice(s) you’re being paid for.

5. Under Deposit To, select “Undeposited Funds.”

6. Fill in Payment Method (e.g., Check, Cash, Venmo).

7. Click Save and Close.

💡 Why choose “Undeposited Funds”?It temporarily holds payments that haven’t yet been deposited in your real-world bank. Think of it as your virtual "cash drawer."

STEP 2: Deposit the Grouped Payments

After you've taken the actual payments to the bank...

1. Click the “+ New” button again.

2. Select “Bank Deposit.”

3. Choose the Bank Account where you made the deposit (e.g., Business Checking).

4. In the Received From section, you’ll see a list of payments in Undeposited Funds.

5. Check the boxes next to the payments you actually deposited together.

6. Ensure the deposit total matches your actual bank deposit.

7. Add any bank fees in the "Add funds to this deposit" section (optional).

8. Click Save and Close.

✅ Now your QuickBooks deposit matches the single deposit on your bank feed, which is crucial for a smooth bank reconciliation.

🔍 Common Mistakes to Avoid

• Don’t skip the “Bank Deposit” step! If you record the deposit directly instead of using Undeposited Funds, QuickBooks may show the deposit twice—once as a customer payment and once as a deposit.

• Avoid recording each payment directly to your bank account unless each payment is deposited individually.

• Don’t ignore Undeposited Funds—review this account regularly to avoid lingering unprocessed payments.

🎯 Pro Tip

To simplify things in the future, only deposit customer payments that were actually grouped in one bank deposit. If you deposit payments separately, process them individually in QuickBooks too.