You have created and sent your invoice, and now the payment is in your Undeposited Funds account. What’s next? As always, you should remember that transactions in QuickBooks should mirror life - so now it's time to deposit those payments into an account in QuickBooks.
The Bank Deposit feature serves two functions:
If payments are received into the Undeposited Funds account, you can group payments and deposit them as a single record into an account.
The ability to record items that aren't typically captured on invoices or bills, such as assets and loans.
Why do I need to use the Bank Deposit feature in QuickBooks Online?
If you’ve read the article Using Undeposited Funds in QuickBooks Online, you know that our Bank Deposit workflow is unique. This final step ensures the money you have received from payments is accurately recorded.
Let’s get started!
There are a few ways to enter bank deposits in QuickBooks, and the one you choose depends on how your original transactions were entered.
Receiving payments against an Invoice (most common)
In this situation, you’ve already sent your invoice and received the payments into your Undeposited funds account or recorded a sales receipt. Your next step is to click on the + New icon and choose Bank Deposit.
After you receive payments from an invoice into the Undeposited Funds account, the transactions automatically populate in the Select the payments included in this deposit section at the top of the Bank Deposit screen.
Deposit the payments on the Bank Deposit screen exactly as they appear on your bank records - if you have one payment to deposit, deposit only that payment; if you have deposited a group of payments as a single deposit into your bank, select each one and deposit them as a group.
You can group the payments by checking multiple amounts:
You can manually add funds to deposits in the bottom section of the Bank Deposit screen. You need to enter these manually (assets, liabilities and equity to accounts) since these don't come from sales forms.
Note: Do not jump ahead and add the invoice payment using this "Add funds" feature. If you enter it here and later deposit a payment to that open invoice, you will double count your income!
What about recording Bank Fees?
Some banks or services like PayPal charge a small fee for processing transactions. It may seem like a small amount (why would anyone care about $.15?), but when it’s time to do your monthly reconciliation, you may find that your records are off. For example, the invoice shows $1,000.00, but the same transaction from your bank shows $999.85.
No worries, there's an easy fix. Go through your normal process of creating an invoice or sales receipt. When you're on the Bank Deposit Screen, go down to the "Add funds to this deposit" section. If you don't have one already, create an expense account and call it something easy to remember, like "Bank Charges."
Enter the bank fee as a line item in the "Adds fund to this deposit" section, then select your new Bank Fee expense account and enter a negative value that reflects the bank fee amount.
Tip: If you know the fee is 1% of the total, enter this formula -(total)* .01, and hit the tab key to quickly calculate the fee.
A quick note about QuickBooks Payments
You will see a QuickBooks Payments section only if you are subscribed to that service. You don’t need to do anything with these payments because your accounts are automatically updated once the payments clear.
Show me how it works
I have three invoices for Intuit for some work I’ve done for the company. They have been paid and I’m ready to receive payment. I also have one sales receipt I entered because I received payment at the time of sale.
Reminder: I don’t have to receive payments for a sales receipt since I’ve already been paid.
Go to the +New button and select Receive Payment for the three invoices.
Now that all the payments are recorded in QuickBooks, I am ready to make a few bank deposits. I go back to +New and choose Bank Deposit.
I see that my sales receipt and three invoice payments are all there, ready to be deposited. Depending on whether I have deposited these payments into a single or grouped transaction, I can click the box next to the transactions and add as many as I need to the deposit. If each payment was deposited as a single transaction, I should deposit them one at a time.
Be careful - do not batch deposit unrelated transactions unless they weren't deposited in your actual bank the same way.
This is important because payments from unrelated sources, if selected together, the system will recognize them as a single deposit.
I hope this deep dive into bank deposits helped explain it’s importance and how you can fit it into your workflow. Following a routine in your transactions from start to finish prevents any mistakes and headaches down the road.
As always, the QuickBooks Community is here for you!