Undeposited Funds for Rental Property Deposits

Looking for best practices help. I have several rental properties. For years, I would try matching check deposits with the deposit entries that Quicken would make when you use the <enter rent> function in rental property manager. That became a huge hassles as the number of properties increased. Even time I would do a match I would manually need to update the category and tab because it would often reset to blank.

I have since created an Undeposited Funds account and use this for all my <enter rents> within rental property manager. When I deposit checks into my checking account I dont mark those with a tag or category so that quicken does not see the entry twice. This process seems to work for me since the Rental Property portion seems up to date with rent entries and now i not longer need to match transactions. However, the Undeposited Checks account continues to grow and show up in reports. I see I can disable it from appearing in reports and that I may lose features if I do so.

Question... Am I using Undeposited Accounts correctly?

Comments

  • volvogirl
    volvogirl SuperUser ✭✭✭✭
    The main purpose of the Undeposited Funds account is so you can enter the checks paid individually to the right rent.  Then you make the Checking account deposit for the total amount and make it a TRANSFER to the Undeposited Funds Account to clear it out.  

    That way when you download your bank transactions the deposit will match.  Or you should use the holding account if you receive payments in one year (like in Dec) but don't make the deposit until the next year (like Jan.).
  • volvogirl
    volvogirl SuperUser ✭✭✭✭
    If you are not transferring the deposit to the Undeposited Funds account then where/how are you categorizing the deposit?  You might be counting your income twice.   
  • bigtsmga
    bigtsmga Member
    Thanks. What you are saying makes sense. In this case you describe it wouldn't be much different or me to <enter rent> directly into the checking account where I deposit the checks.. and then match the transactions. I was trying to solve the problem of matching transactions. The process is way too cumbersome each month. It was no problem for 1 rental property but I have 15+ now which would take a good amount of time each month. I was hoping to use <enter rent> as my checklist and also to attach a category/tag for the transaction for record purposes.. Then the real deposits into my account would have no category/tag in order not to count the transaction twice. I guess this is sloppy accounting. I just cant believe there isnt a more streamlined way to do this in this program. Matching transactions and then manually updating each tag/category is a mess. Thoughts? Thanks again.
  • bigtsmga
    bigtsmga Member
    And I currently hid the account so that i does not appear in my net worth or main page. When I run my schedule E i need to filter on transactions with TAGs only .. so that the deposits without tags do not appear. Thoughts?
  • volvogirl
    volvogirl SuperUser ✭✭✭✭
    You are doing it right by using the Undeposited Funds Account.  That is how you are suppose to do it.  But you just need to make one entry in the checking account for the actual deposit as a transfer to clear the balance in the Undeposited account.  Follow?

    Then if you download the checking account transactions it will match to the single deposit amount.




  • bigtsmga
    bigtsmga Member
    My problem is that the transactions won't match automatically. Step one.. manually make transfer from undeposited fund to the checking account. Two.. find matching transactions and merge them... Three edit the category which blanks out when u merge them. Four... Edit the tag which blanks out when u match them. Rental property...This is in addition to clicking enter rent in the rental property screen to check off the rent was received which puts it in undeposited funds.

    Take too much time. No?
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited January 2020
    "My problem is that the transactions won't match automatically."
    You might need to explain what you mean by that since I don't know to what you're referring.
    But the concept of using a "clearing account" - an account into which you make entries understanding that you're going to be moving those entries out to another account - is a very common concept and a method that's widely used. 
    Probably the most common clearing account situation is the exact situation you're facing: you collect rent checks for a period of time, (maybe around the 1st of the month), debiting (increasing) the balance in the clearing account by entering each check individually.  Then, at some point, you gather up the checks and make a deposit at the bank, crediting (reducing) the balance in the clearing account, (maybe to $0) and increasing the bank account.
    The entries of the individual checks to the clearing account create the proper detail accounting entries: an increase in "cash", (the clearing account), and an increase in rental income.  Each check is attached to the correct individual rental unit.  That rental unit is "paid", (even if you haven't actually deposited the check), and you have the detail available to you so you know who has paid paid and who hasn't.
    The actual deposit to the bank of multiple checks is typically made "in bulk."  That is, if you have 7 rental checks that total $8,075 and that's the amount of your bank deposit, you make one credit (reducing) entry of $8,075 in the clearing account and one $8,075 debit (increasing) entry in the bank account.  (As a practical matter, you could put a "c" next to the 7 checks you've deposited and the deposit itself in the clearing account.  That helps you know what checks have been deposited and what checks remain to be deposited.)
    Typically, banks report deposits "in bulk."  That is, the $8,075 deposit should be reported by the bank, and it should match your entry into your Quicken Account.
    I couldn't really follow your blow by blow recitation of Quicken entries, but it sort of sounded like you were making "detail" entries throughout the process, and that's not necessary.  All your nitty-gritty  detail is captured by the "deposits" in the clearing Account.  After that you're just moving big wads of money around.
    If, by chance, the bank is reporting the detail deposit to you then you will have to make detail entries in the clearing Account, but you can't simply use the same exact "Payee" as the actual payee; if you have memorized transactions Quicken will try to make an incorrect entry.  I'd probably use a changing payee that corresponds to the deposit date, like "Deposit 1/7/2020", "Deposit 2/9/2020", etc.  Over in the bank Account that will allow you to match downloaded detail.
  • bigtsmga
    bigtsmga Member
    Thank you for the detailed response. Makes sense about the bulk deposits. However, most of my bank deposits are from venmo, zelle, or square cash. Because you cant do bulk deposits with venmo (they have a transfer limits) I usually transfer dollars from venmo to my bank in the same amounts as the rent paid we property. So if I want to properly debit the clearing account, then I would be stuck making equal individual transfers from the clearing account for each rent deposit... And then manually merging them with each deposit in the checking account... Sounds like that is the process although time consuming. Thanks again for the help. Please comment if I missed anything.
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    If you have a venmo Account in Quicken, then why would you use the Undeposited Funds Account in the first place?  That Venmo Account becomes your "clearing account" for payments by venmo.  Same for zelle and square cash; you just use those Accounts as clearing accounts for payments made that way.
    If these different payment processors have different ways of transferring money to your actual checking account - "bulk" here, one-at-a time there, limited "bulk", whatever - then you have to adapt your entries accordingly.  Or, simply tell your renters to pay you directly with checks.  You've allowed these other options so you have to dance to their music. 
    The point is, whatever method of payment you accept probably necessitates a different Account for each in Quicken.  All the detail you need for your rental activities originates with the deposit into the venmo, zelle, square or Undeposited Checks Account.  I would assume the bank reports deposits according to how they're received from the different payment processors.  If not, then you're going to have to do the extra work - whatever that is - to leave a clean audit trail of "out" from the payment processor to the "in" to the bank.
  • bigtsmga
    bigtsmga Member
    Thank you..this all makes sense. my main concern is the difficulty in matching the actual deposit to the transfer from the clearing House and ensuring the categories and tags are appropriate....and how time-consuming that is. Does no one else feel that pain?
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited January 2020
    "my main concern is the difficulty in matching the actual deposit to the transfer from the clearing House and ensuring the categories and tags are appropriate."  "Does no one else feel that pain"

    Very clearly, you are not understanding the process or you're entangled in a web of your own making. 
    Transfers from any of your "clearing" accounts - venmo, zelle, square or the Undeposited Checks Account - have no tags, and the Category is simply the name of the Account in Quicken where you make your deposits.   So all of your transfers out of all your clearing Accounts look exactly the same except for the amounts:
    Debit (increase) [Name of Bank Account]     $XXX
    Credit (decrease) [Name of clearing Account]   $XXX
    Accordingly, matching all your various actual deposits to what the bank reports to you is absolutely trivial if what the bank reports to you mimics how you made your Quicken entries, i.e., if you made your transfer "in bulk" then that's how the bank reports the deposit amount, and if you made your transfer check-by-check that's what the bank reports. 
    You may want to dial back the number of ways you'll accept money from your renters.
    I think I've done all I can here.
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