Undeposited Funds: The most underrated GL account
As mentioned in our last post, it’s important for your books to match your bank statements. That’s where undeposited funds comes in. It serves two purposes: to group payments going in the bank together and to provide the opportunity to record deposit adjustments.
When receiving a payment, you have the option of where to put it – in the bank or into undeposited funds. While yes, the payment does ultimately end up in the bank, in most scenarios, you want to use undeposited funds.
Once the payment is posted to undeposited funds, do “make deposit”. If more than one payment went in together, select those payments from the window and record the group deposit. Or say, for example, you use Square and they deposit less than the sale amount. In the deposit window, you would select the payment, and then add in an adjustment line for the deducted fees.
Doing your payments and deposits this way creates a better match to the bank and makes
reconciliations much easier at month-end!