How to clear out Undeposited Funds

Happy New Year, KB001. I'm here to help you clear the payment in your Undeposited Funds (UF) in QuickBooks Desktop (QBDT)

Based on the details you've provided, there are a few options to address this issue. First, was the payment reflected on your bank statement? If it was, we will need to process a chargeback to properly clear the payment, enabling you to reconcile it accurately. On the other hand, if the transaction does not appear on your bank statement, you can simply delete the payment from Undeposited Funds. I also recommend consulting with an accountant for additional advice and options to ensure your books are accurate.

To process a chargeback, you can either create a refund transaction or record it as a business expense by issuing a check.

Here's how to create a refund:

1. Go to the Customers menu and select Create Credit Memos/Refunds.
2. Choose the customer you need to refund in the Customer:Job dropdown.
3. Enter the products and services you are refunding.
4. Once completed, select Save & Close.
5. You'll be prompted to the Available Credit window. Choose to Give a refund and click OK.
6. Once prompted in the Issue a Refund window, choose how you want to refund the transaction from the Issue this refund via field. If you choose Cash or Check, select the account used to pay the refund.
7. Select OK when finished.

For instructions on creating a check, please refer to this article: Create, modify, and print checks in QuickBooks Desktop.

Here's how to delete the payment:

1. Go to Customers and select Customer Center.
2. Navigate to the customer and open the old invoice payment.
3. Click Delete.

Additionally, you may find this article helpful for keeping track of your sales and expenses using predefined reports: Customize customer, job, and sales reports in QuickBooks Desktop.

Please feel free to continue this conversation if you have any more questions or need further assistance clearing your Undeposited Funds in QuickBooks Desktop, KB001. We’re always here to help whenever you need us.

RE: How do I clear out the payment in undeposited funds that was never received?

Void or delete it, since it never happened.

Thank you for the response, however, the invoice and payment were in Nov and that period has already been closed.  Please advise.

And the payment did not appear on the bank statement.

RE: the invoice and payment were in Nov and that period has already been closed.

Well, that means you closed the period too early, before you validated all of the data for the period. There's no

reason to not open it again, fix the data, then close it again and print new financials (if you need to).

Why would it appear on the bank statement if it didn't happen and you didn't deposit it?

It should never have been entered into QuickBooks in the first place - you didn't even receive it. Payments that haven't been received have no business being in QuickBooks in the first place.

@KB001 

@BigRedConsulting is correct in that you should void/delete the payment, especially if you're on cash basis. 

If for some reason you can't, then you need to reverse it in the current period.  To do that, create a journal entry (JE) (Company > Make General Journal Entries).  You need to know what account to offset because this is double-entry accounting and the amount that is overstated in undeposited funds (UF) is also overstated somewhere else in your books. 

If the original invoice wasn't deleted (you mentioned you created a new invoice), then you need to offset the income from the original invoice. If that's the case, the JE is a debit to the appropriate income account(s) from the original invoice and a credit to UF. 

If the original invoice was deleted, then the amount in UF should be offset by A/R on the customer's account.  If that's the case, the JE is a debit to A/R and a credit to UF.  Don't forget to clear the A/R credit created from the Nov. UF payment against the A/R balance due created by the JE.