Undeposited Funds vs. clearing accounts in QuickBooks

Published on Beamarc: September 30, 2026.

Undeposited Funds and processor clearing accounts both help connect recorded payments to the bank. Choose the workflow that matches how money is actually received and settled, then use it consistently.

What Undeposited Funds does

In QuickBooks, Undeposited Funds can hold customer payments and sales receipts until they are grouped into a bank deposit. For example, five $100 checks can be recorded separately and then combined into the single $500 deposit shown by the bank.

Recording the bank deposit transfers those already-recorded receipts. It should not create another $500 of revenue.

When a processor clearing account helps

A dedicated clearing account can make it easier to track net payouts involving processing fees, refunds, disputes, reserves and multiple settlement dates. Separate accounts or reliable sub-schedules help distinguish providers and currencies.

Undeposited Funds is not categorically prohibited for payments involving fees. Intuit documents adding fees in a deposit workflow. The right choice depends on the integration and whether the process produces supported, traceable balances.

A simple processor example

Assume a completed $100 sale, a documented $3 processing fee and a $97 payout, with no tax, refund or other adjustment.

1. Record the $100 sale and the amount due from the processor once, if the sale has not already been recorded.
2. Record the $3 fee against processor clearing.
3. Transfer the $97 payout from clearing to the bank.

Clearing returns to zero for that completed transaction. If the sale originated as an invoice, settle accounts receivable through the payment workflow rather than recording revenue a second time.

Investigate these recurring problems

• Payments remain in Undeposited Funds while deposits are posted to income. Match the existing receipts to the deposit and correct duplication with supporting records.
• Processor balances have no open-item schedule. Reconcile charges, deductions and transfers to provider reports, then identify the items still outstanding.
• Refunds or fees appear twice. Determine whether the integration, manual journal and bank feed describe the same activity.
• A bank match is mistaken for a full reconciliation. Confirm the complete statement balance and all reconciling items, not just selected transactions.

Age the remaining items

For each open receipt, payout, reserve or dispute, retain its reference, date, amount, expected next event and owner. Set follow-up thresholds around the provider’s actual terms.

A balance does not have to be zero on every reporting date. It has to be supported. An old dispute or reserve may remain open legitimately, while even a recent duplicated receipt may require correction. Do not write off or move an item solely to make the account clear.

Correct the workflow before repeating the close

Review who creates invoices, receipts, deposits and processor entries. Identify the single source for each part of the transaction and document how bank-feed items should be matched. Preserve the correction trail and assess the effect on closed or filed periods.

Then reconcile the account each month and review exceptions while the source records are still available.

How Beamarc can help

Beamarc provides bookkeeping, monthly close, financial reporting and accounting advisory. We can discuss the records available, the questions you need answered and the support that fits your business. Scope, responsibilities, timing and fees are agreed before work begins.

Request a consultation.

Related reading

• Opening Balance Equity in QuickBooks: how to resolve it
• Clearing-account aging for ecommerce payouts
• Ten common QuickBooks cleanup problems and how to fix them

General information only. Accounting and tax treatment depend on your facts and reporting framework. This article does not provide assurance or establish a client relationship.