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How to Record Customer Deposits In QuickBooks

One of the most common issues I discover when cleaning up a new client’s QuickBooks’ account has to do the processes surrounding receiving customers’ payments and depositing them. Whether you accept credit card payments or take physical checks to the bank the amount that will actually hit the bank account is more often than not the sum of multiple customer payments. 

For example, you accept one customer check for $100 and another customer check for $200. You take them to the bank together and will see $300 on your bank statement. Alternatively, credit card processors batch all the deposits received on a given day and deposit one lump sum at the end of the day. This amount is often net a processing fee which causes additional bookkeeping problems.

When reviewing a new client’s QuickBooks, it is common to see each individual customer payment recorded in the checking account register. This causes the account reconciliation process to be much more time consuming than if deposits would have been recorded in aggregate. 

In order to properly record deposits, you have to create an Other Current Assets account in QuickBooks called Undeposited Funds.

How to Create an “Other Current Assets” Account in QuickBooks

Quickbooks Account screenshot

Whether you record customer payments using Sales Receipts or by receiving payment on invoices make sure the “Deposit to” account is set to Undeposited Funds and not to your checking account. An additional step must be undertaken now to move the customer payments from Undeposited Funds to your bank account. 

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How To Move Customer Payments From Undeposited Funds To Your Bank Account

Using the Quick Create Menu (+New) select Bank Deposit. This screen will show a listing of all the checks you have received. Tick the box of each row for the check that you are going to take to the bank. The big bold number in the top right of the screen should match exactly what the bank deposit slip says and exactly what the bank statement will say. The “Add funds to this deposit” section of the Bank Deposit screen offers one option for recording the processing fee charged by your merchant services vendor. In the account field, choose something similar to merchant processing fees and enter this as a negative number to adjust down the total deposit amount.  

Benefits Of Correctly Recording Your Deposits

Taking a few seconds to perform this small additional step each time you make a deposit will save days of work when reconciling accounts at year-end. This small additional step will keep your books clean, retain customer level information and make sure your bank reconciliation can be completed with ease. 

Need Help? Ask The Pro’s

If you haven’t been following the above procedures and need help adjusting your historical data and properly implementing the above procedure the accountants at Szweda Consulting, LLC, a Quickbooks certified bookkeeper.Call us today at (216) 509-1561 to book an appointment/consultation we offer the best bookkeeping services.

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