What is Undeposited Funds?
Overview:
In this article, we explain what the Undeposited Funds account is, how it functions within the Accounting module and how it is used to ensure your recorded payments align with your actual bank deposits. Please find the available resources below.
Quick Reference:
When your brokerage receives a payment—like a commission check from a title company or an invoice payment from an agent—that money doesn’t always go straight into your bank account. Maybe you’re collecting several checks and plan to deposit them together. Maybe the payment came in late and you’ll take it to the bank tomorrow.
Undeposited Funds is the Accounting Module's way of holding those payments in a temporary spot until you actually deposit them at the bank. Think of it like a lockbox on your desk—money goes in when you receive it, and it comes out when you physically take it to the bank (or the deposit clears electronically).
Why Does It Exist?
In real life, you often receive multiple payments before making a single deposit. The Accounting module needs to mirror that same process so your books match your bank statement. Without Undeposited Funds, every payment would look like its own separate deposit—and when you try to reconcile with the bank, nothing would line up.
For example, say you receive three commission checks on Tuesday: $2,500, $1,800, and $3,200. You bundle all three and deposit $7,500 at the bank. Your bank statement shows one deposit for $7,500—not three separate ones. Undeposited Funds lets the Accounting Module group those three payments together so they match the single $7,500 deposit on your statement.
What This Means for You Day-to-Day
Don’t ignore Undeposited Funds.
If you never create Bank Deposits, payments pile up in Undeposited Funds forever. Your bank balance in the Accounting Module will look lower than it really is, and reconciliation will be a nightmare.
Match your deposits to reality.
When you create a Bank Deposit, only select the payments that were actually included in that specific deposit. This is how you keep the Accounting Module in sync with your bank.
Check it regularly.
Make it a habit to review your Undeposited Funds account. If the balance keeps growing and you’re not sure why, it usually means deposits haven’t been recorded in the Accounting Module yet.
Common Mistakes to Avoid
Mistake | What Happens |
Skipping Bank Deposits entirely | Undeposited Funds balance grows and your bank balance in the Accounting Module is wrong |
Recording payments directly to a bank account (bypassing Undeposited Funds) | Each payment shows as a separate deposit thus creating duplicate entries |
Selecting the wrong payments when creating a Bank Deposit | Your deposits won’t match the bank statement and reconciliation will fail |
Letting Undeposited Funds build up for months | The Balance Sheet for the Company will be negatively affected |
