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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 2026-10-06. 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 ↗
How to clear Undeposited Funds
Clear it one real bank deposit at a time. Take the deposit from your statement, say the one from March 14. Select + Create, then Bank Deposit. From the Account dropdown, choose the bank account the money went into. All transactions in Undeposited Funds appear in that window. Tick each payment that made up the March 14 deposit, confirm the total matches the deposit slip, and select Save and close.
Intuit calls the key to the whole process making sure your deposit in QuickBooks is for the exact same amount as the deposit on your bank statement. If the totals do not agree, you have picked the wrong payments or one is missing.
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: Record and make bank deposits in QuickBooks Online ↗
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.
Questions
What is Undeposited Funds in QuickBooks Online?
It is a holding account for customer payments. Intuit describes it as a temporary lockbox that keeps payments until you record a bank deposit, and QuickBooks Online puts invoice payments and sales receipts there by default.
Why does my Undeposited Funds balance keep growing?
Usually because the same money was entered twice. The payment went into Undeposited Funds, then the deposit in the bank feed was added as a new deposit or sale instead of being matched to that payment. Income is overstated and the account never empties.
How do I clear Undeposited Funds in QuickBooks Online?
One real bank deposit at a time. Select + Create, then Bank Deposit, choose the bank account, tick the payments that made up that deposit, check the total matches the bank statement, and save. Then match the bank feed line to the deposit you just made.
Can payments skip Undeposited Funds?
Only when one payment equals one bank deposit. Then you can change the Deposit to account on the payment from Undeposited Funds to the bank account.