What happens to customer payments recorded but not yet deposited in QuickBooks?

When customer payments are recorded but not yet deposited in QuickBooks, they are temporarily held in the Undeposited Funds account. This account serves as a holding place for payments that you have received but have not yet deposited into your bank. It allows you to keep track of the total amount of cash you have on hand from various customers before you perform a bank deposit.

The Undeposited Funds account is particularly useful for businesses that receive multiple payments throughout the day, as it enables users to group these payments together for a single deposit, simplifying the reconciliation process with the actual bank statement. When the deposits are eventually made, the payments can be moved from this account to reflect the cash in the checking account accurately.

In this context, customer payments do not immediately affect the checking balance or get converted into invoices. Additionally, payments are safely stored in the Undeposited Funds account and are not lost if not deposited within a month, although it is advisable to ensure timely deposits for accurate bookkeeping and cash flow management.