Deposit payments into the Undeposited Funds account in QuickBooks Online

Once your customer pays your invoice you need to record it in QuickBooks. Let’s go over two ways you can receive payment and how to properly use the undeposited funds account to keep your books accurate. The first way you can receive your payment is to select Sales. Then select Customers. This shows your Customers List. Just find your customer and you will see the money they owe you here. To receive a payment, you could select Receive Payment right here. However, another way to receive payment is to select the Create menu and Receive Payment. Then, enter the customer’s name. QuickBooks displays any open invoices for that customer. Select the checkbox for the invoices the customer is paying. QuickBooks assumes that the customer is paying the entirety of the invoice, but if this is a partial payment, you can change the payment amount. Next, record how the customer paid you. If you don’t see their payment method listed, just select Add New and add it. This customer is paying with a check. You don’t always need to record a reference number, but since this customer is paying with a check let’s record their check number. Then choose the account where the money is right now. It's tempting to choose checking, but unless the money is in your checking account already you should choose Undeposited Funds Undeposited Funds is a temporary account that holds payments you plan to deposit later at the bank. They aren’t in the bank yet, but they will be later. Undeposited Funds is important because it allows you to easily combine several payments together into a single deposit at the bank. If you don’t combine deposits then you can skip this and just record the payment once it is in the bank if you prefer, but otherwise it is best to use Undeposited Funds. Let’s select Undeposited Funds so we can combine it with other deposits later. Then select Save and Close. Now this customer has a zero dollar balance since they paid their invoice. If you recorded the money going directly into a bank account, you’re done! But if you used Undeposited Funds, you’ll need to record the deposit after you put it in the bank. To see this process watch our video on How to Record a Bank Deposit. Now try recording an invoice payment of your own.