What are undeposited funds?

I just had somebody call me on this yesterday. Their question, “Why is there a balance in undeposited funds? I don’t have undeposited funds.”

Think of UFs as a temporary holding account. It serves as an invisible cash drawer, before the deposit hits the bank.

What happens most of the time is business owners record a payment to an invoice in QBO, but the deposit hasn’t been recorded yet. QBO records the payment as “undeposited” until you create a bank deposit that moves the payment into the bank account.

Be careful here! When the deposit comes through the bank feed, you must MATCH it to the deposit you created in QBO. If you add the bank transaction instead of matching it, QBO will duplicate the income - one entry from the payment sitting in UF and another from the bank feed.

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