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Undeposited Funds in QuickBooks: what it is and how to clear it
If your Undeposited Funds balance keeps climbing, QuickBooks is holding customer payments that were never combined into a bank deposit. Here is what the account is for, how to see what is sitting in it, and how to clear it.
Updated 2026-09-16. Steps refer to QuickBooks Online and link to Intuit’s own help articles.
What Undeposited Funds is for
Intuit describes the account as a temporary lockbox that keeps payments until you record a formal bank deposit. When you receive a payment on an invoice or enter a sales receipt, QuickBooks Online puts that payment in Undeposited Funds by default.
The point is to match the bank. If you take five checks to the bank on one slip, the bank shows one deposit. QuickBooks needs the five payments combined into one deposit too, or the bank feed and your books will never agree.
Why the balance keeps growing
The usual cause is a second entry. The payment is recorded against the invoice, which puts it in Undeposited Funds. Then the deposit shows up in the bank feed and gets added as a new deposit or a new sale instead of being matched to the payment already entered.
Now the same money exists twice: once in Undeposited Funds, waiting, and once as a deposit that went straight to the bank account. Income is overstated by that amount, and Undeposited Funds never empties.
See what is sitting in the account
Open the Chart of accounts, find Undeposited Funds, and choose Run report from its Action menu. The report lists every payment still waiting, over a default 90-day range you can widen.
Sort by date. The oldest entries tell you how far back the problem goes, which is the first thing an accountant will ask.
Source: Run an undeposited fund report ↗
Clear it one real deposit at a time
Take a real bank deposit, say the one from March 14. Create a Bank Deposit in QuickBooks and tick the payments from Undeposited Funds that made up that deposit. The total should equal what the bank received. Every payment in Undeposited Funds appears in that Bank Deposit window automatically.
Then go to the bank feed and match the March 14 bank transaction to the deposit you just made. If that bank transaction was already added earlier as a separate deposit, you have found a duplicate. Do not delete anything from a year whose taxes are already filed without asking your accountant first.
Repeat for each deposit, oldest first, until the report is empty for the period you are cleaning up.
Source: Deposit payments into the Undeposited Funds account ↗
Keep it from coming back
When a deposit appears in the bank feed, look for a match before you add anything. If a customer payment is already recorded, QuickBooks will usually suggest it. Adding creates a new transaction. Matching links the bank line to the one you already have.
If you deposit each payment on its own, you can change the Deposit to account on the payment from Undeposited Funds to the bank account so it skips the lockbox. That only works when one payment equals one bank deposit.