To record ATM withdrawals, first ask what the cash paid for. Cash the owner kept is an owner draw. Cash spent on business costs is coded to those expenses, backed by receipts. Cash kept on hand for small purchases moves to a petty cash account. Until the client answers, the withdrawal waits in a holding account.
Where can an ATM withdrawal be coded?
An ATM withdrawal can be coded to one of four places: an expense, owner draws, a petty cash asset, or a temporary holding account while you wait for an answer. The statement line only says cash left the account. What happened to the cash after that decides the account, and only the client knows.
The decision table below maps what the client tells you to the account and the record you keep. The wording in the first column is an example of a client's answer.
| What the client says | Code the withdrawal to | Record to keep |
|---|---|---|
| "I bought fuel and parts for a job" | The matching expense accounts | Receipts for each purchase |
| "That was for me" | Owner draws | The client's note |
| "It sits in the cash box for small buys" | Petty cash | A cash log and receipts |
| "I paid a helper for the day" | Contract labor or wages | Name, date, amount, signed note |
| "I don't remember" | Holding account, then owner draws if still unknown at close | Your question and their answer |
The last row matters most. A withdrawal with no answer should not be coded to a business expense by default, because that lowers profit with no support behind it.
ATM withdrawal receipts to request before coding
The receipts to request are the ones that show what the cash bought. A bank statement proves money left the account, but it does not show the payee or the purpose. Before a withdrawal becomes a business expense, ask the client for the purchase receipts, or for a short written note when no receipt exists.
The IRS page on what kind of records to keep says supporting documents for an expense should show the payee, the amount paid, proof of payment, the date and a description of what was bought. An ATM line covers proof of payment only. The receipts have to supply the rest.
A practical request to the client looks like this:
- List every ATM withdrawal for the month with date and amount.
- Ask the client to reply next to each one with what it paid for.
- Ask for photos of any receipts, attached to the same reply.
- Set a date by which unanswered lines will be coded to owner draws.
The fourth step gives the client a reason to answer. Most owners would rather send a receipt than see a business cost treated as personal.
Should ATM cash go to a petty cash account?
ATM cash should go to a petty cash account when the business keeps a float on hand and spends it over time. In that case the withdrawal is not an expense yet. It is cash moving from the bank to a cash box, and the expenses are recorded later from the receipts as the float is spent.
A petty cash account works only if someone keeps a log. Each purchase from the box is written down with a receipt, and the box is counted from time to time. The count plus the receipts should equal the float. When the client tops the box up from an ATM again, the new withdrawal is another transfer into petty cash.
When petty cash is the wrong choice
Petty cash is the wrong account for a client who withdraws cash and spends it the same day. That client has no float, no box and no log. A petty cash balance in their books would grow every month with no way to count it. Code each withdrawal straight to the expenses it paid for, or to draws.
ATM withdrawals that pay casual labor or cash wages
ATM withdrawals that pay helpers are labor costs, and they need more care than a supply receipt. A client who pays a day laborer or a part-time worker in cash still has a business cost, and possibly payroll or contractor reporting duties. Code the cost to contract labor or wages only after you know who was paid and how much.
Ask for the worker's name, the date, the amount and what work was done. Whether that person is an employee or a contractor is a question for the client and their tax preparer, not something to settle from a bank line. If the client runs payroll for other staff, the cash payments may belong in that payroll. The guide to recording payroll from bank statements covers how wages, tax payments and provider fees should agree with the payroll report.
Cash is not the only way small payments to people show up without detail. Peer payments that carry just a first name raise the same question, and categorizing Zelle and Venmo payments when the description is just a name shows how to ask once and turn the answer into a rule.
ATM surcharge fees and odd withdrawal amounts
ATM surcharge fees are bank charges, separate from the cash withdrawn. Some statements print the fee as its own line; others add it to the withdrawal, so a 200.00 withdrawal shows as 203.50. Split the combined line: the round part follows the cash, and the remainder goes to bank fees.
An odd amount is the clue. ATMs dispense round sums, so a withdrawal that is not a multiple of 20.00 or 10.00 usually includes a fee or a foreign currency conversion. A withdrawal abroad may show the local amount, the converted amount and a foreign transaction fee on separate lines.
Checking a batch of withdrawals at once
For a client with many cash withdrawals across several accounts, convert the statements together and sort the lines by description. AutoBankConvert reads a folder of statements in one run and holds lines its rules are unsure about in a review queue, so the ATM lines can be pulled into one list for the client. The guide to a bulk bank statement converter for a mixed folder covers how such a run sorts files by client and account. To try it on your own statements, request a spot.