Payments sitting in Undeposited Fund Account

This is a problem I see quite often.  Usually by new users that don't understand the functions in QuickBooks.  The following is the scenario:

You go to a client's site and you see a large balance in the Undeposited Fund account.  You click "Banking" and "record deposits" and there are a year's worth of customer payments sitting there to be deposited.  You ask them if they have been reconciling their checkbook, they say "yes".  

Then you realize, they have been invoicing customers, entering the payments in "receive payments" and then going to Banking, "record deposits" and manually re-entering the total deposit.  They should be following the flow chart on the home page and clicking "record deposits" and then payments and grouping the customer payments for deposit.

Here is what the deposit detail report will look like if they enter them the wrong way:

Here is how you fix the problem in a few steps.  On the home page, go to Banking:  record deposits.  All of the payments will show up automatically.

Select them all and then tab down one line to enter the adjusting account (the account where the deposits were manually entered, usually this is the income account). You enter the total amount of the deposit with a minus sign in front of it.  This will record the customer payments and reverse the manual entries.  

Make sure you enter a memo explaining why this entry was recorded.  And that is it.  Going forward, make sure your client knows how to record customer transactions in QuickBooks.  The home page flow is a great way for them to consistently work with the QuickBooks features.

NOTE:  You want to make sure that the adjusting entries are entered by year (in other words, group the customer payments by year).  Enter the adjustments for the year in which the customer payments were recorded.

Also:  If you have the Accountant's version of QuickBooks 2010 or newer, see this video as to how to clean up the undeposited fund account using client data review feature.

Lynda

Check out my website www.artesanibookkeeping.com