the ATM

I'm looking at a new client that is cash only, with an ATM. Of course the books are spotless, as they always are. I may be over thinking this, but I'd like to present a simple scenario and see if anyone can shed a little light.

Assume a customer comes in to the restaurant and withdraws $100 from the atm. It seems to me that we essentially have some kind of receivable from the ATM company which would be the $100 + whatever fee the ATM charges, etc.

Now the customer sits down and has a burger and a couple drinks and spends $50. Obviously the client now has $50 in sales. The problem I'm having is that the manager doesn't make any entries to the books to cover the amount of cash from the ATM that walks out of the bar unspent.

The manager does correctly record each days sales from a report that is produced from their POS system. They make a daily journal entry balancing each sale category against the cash received and over/short. Most of the cash they take in either goes back into the atm, or is occasionally taken to the bank for deposit or to trade for change.

Now when I go to reconcile, cash per bank statement doesn't match what was entered each day because the ATM company deposits whatever was withdrawn, not what was actually sold. So if I gross up the cash deposits to match, I have a credit balance that needs to go somewhere. Since no receivable is initially booked, I have nothing to relieve it against.

side note: I know the risks of cash only business and I have satisfied myself that the manager is making the appropriate daily sales entry, save the ATM component. I made it very clear I have no intention of burying income; but that extra cash that hits the bank in my mind is not a sale. Though I always appreciate input, I'm looking at how to fix the current issue, and then help them develop procedures and controls that will allow better reporting and security for the owners.

I'm tired, cranky and out of ideas.....anyone?

If I understand you correctly, client puts their money into ATM for customers to withdraw, and ATM company reimburses client for the amount of the withdrawal. If that is the case, I think you are correct in your thinking. Let's walk through it.
Client puts money in ATM: DR ATM Cash CR Cash in Bank
Patron withdraws cash: DR Due from ATM Co. CR ATM Cash
Patron buys food: DR Cash in Bank CR Sales
ATM Co. Reimbursement: DR ATM Cash CR Due from ATM Co.
and if your client receives the ATM Fee:
DR Cash in Bank CR Income from ATM

I believe your chain is correct Seaside. I sometimes see negative receivables in QB, where the bookkeeper enters a credit to AR when receiving a customer payment where no AR or sale was originally entered. The remedy is to simply enter and what would have been AR/sales entry had it been made; so I imagine something similar to the legs of your entry above where the customer withdraws cash. I still need to find a proper place to put the credit balance for the second entry you propose above (DR Due from ATM; CR ATM Cash). The negative receivables problem above is relatively easy because you clear the negative AR to the P&L. In this case I want the credit on the balance sheet.

Let's assume the worst and figure this client is stealing his business blind (I've not gone there yet, but it's certainly possible). I'm still stuck on the fact more cash hits the bank than is recorded in the books. There is reasonable JE entered to record each days sales (except for a few days the business is closed). Now let's pretend that the manager is is deflating sales to account for stolen cash, totally possible. That still doesn't quite solve the problem because there is still more cash hitting the bank than being recorded. Regardless of how much is stolen using altered JEs, I will still have "orphan credit" issue because not every penny that is withdrawn from the ATM is spent on premises, but the bank reimburses the full amount drawn by customers. I think this is one of those that when I see the answer, I may not feel so smart. Cash only make me a little nervous and I like this puzzle stuff, but this one is driving me nuts.

Does the restaurant create an entry when they put money INTO the ATM? I assume so, or else I don' t know how else you are making the sales entry. ("Deposit into ATM" in lieu of "deposit into bank".)

You've lost me now, I don't understand your question. The credit would be on the balance sheet with the entries I stated above.

There would have to be an entry when customer withdraws cash from ATM, as well as when the bank reimburses the money.

Seaside--I just meant to that to fix negative AR (when I've seen it in the past in other books), I made an AR/Sales entry, so the negative balance in AR is corrected to a positive balance in sales. I agree, your entries above are all balance sheet, except for the atm fee revenue. That's another thing I have on my list of questions, where is the atm fee revenue?

JoanTB--That's the tricky part. The sales entries credit various sales accounts and debits the "ATM" account. The problem is it's not the ATM, it's the bank account. I am trying to fill in the cracks with my reconciliation, making a list of unidentified transactions, etc. But I can't get past this thing where the books are short cash relative to the bank. I have all bank statements, but nothing from the ATM. I think the next step is to ask for some paperwork or reports from the ATM.

To answer your question directly, no they do not make that entry

The negative balance is sitting at around $20 k at this point, so yeah, not so sure about anything now.

So it sounds like they just have one account - bank account, that they are running the ATM transactions through. If that is the case:
Patron ATM Withdrawal DR Due from ATM Co. CR Cash in Bank
Patron buys food DR Cash in Bank CR Sales
ATM Co reimbursement DR Cash in Bank CR Due from ATM Co.

On their books, they have to be making an entry for the ATM withdrawal of cash, or they will be out of balance.

Please bear with me, I am trying to understand this credit! I thank you very much for your input, my thick skull is about to take a break and get my old dog out for a walk. I think a beginning balance for the ATM would help, too. I understand that they should be making the entries or something along these lines as you say, and I agree:

Patron ATM Withdrawal DR Due from ATM Co. CR Cash in Bank
Patron buys food DR Cash in Bank CR Sales
ATM Co reimbursement DR Cash in Bank CR Due from ATM Co.

But they haven't, and if I try to make a correcting entry based on what should have happened, I still end up with this credit balance that I can't figure out where to put. Right now, I have a correct (as possible at this point) bank balance and reconciliation for the checking account. I've made a second account for the actual ATM, as well as an ATM receivable account. In a perfect world, they will use this going forward. If not, not my problem, they can do elsewhere. However, no matter what I do, I still have this hanging credit.

Arrrggg!!

Are you sure the ATM Co. did not make an initial deposit into the machine? Or to client's bank account?
Is this the first year client has used ATM?

Maybe ATM Co. put initial money in, and they replenish it. In this case, the credit at year end would actually be comprised of two things: Amount due TO ATM Co (instead of from), and the ATM Fee they should be getting.

At this point I'm compiling a list of questions for them. I agree, something is missing. I'll finish my reconciliation and as long as I can back up the balance sheet with outside source docs I'll be happy enough. If they can't answer the questions I reckon I'll end up eating a few hours of time. Client is amiable enough and I haven't had any issues getting what I need so far.

Thank you for you insight.

The manager does correctly record each days sales from a report that is produced from their POS system. They make a daily journal entry balancing each sale category against the cash received and over/short. Most of the cash they take in either goes back into the atm, or is occasionally taken to the bank for deposit or to trade for change.

When looking at the bank statements, can you tell which BANK deposits are made by the ATM company vs other deposits?
When looking at the bank statements, can you tell which BANK deposits are made by the restaurant when they "occasionally deposit cash" into the account themselves?

Is there an entry on the bank statement when they have to take some cash from their bank account and put it in the ATM? I assume that at some point this happens because of folks taking out more money than they spend in the restaurant. It is easy to see where it gets funds INTO the bank account, because the ATM company is reimbursing the restaurant for all the withdrawals, regardless of what the customer does with the money.

BTW - the ATM fees may be charged and kept by the ATM company - why do you think the restaurant gets the ATM fees? Their "benefit" may just be from having the ATM in their restaurant is in the (supposed) increase in cash sales it brings, rather than collecting the ATM fees. Cheaper than paying credit card fees? (which more folks would use if they didn't have an easy way to get cash?)

"When looking at the bank statements, can you tell which BANK deposits are made by the ATM company vs other deposits?

When looking at the bank statements, can you tell which BANK deposits are made by the restaurant when they "occasionally deposit cash" into the account themselves?"

Yes to both questions, the deposits from the atm are specifically marked, others are marked "counter deposit." That part is clear enough, and they don't make up the difference.

"Is there an entry on the bank statement when they have to take some cash from their bank account and put it in the ATM?"

The withdrawals are marked "teller withdrawals."

"BTW - the ATM fees may be charged and kept by the ATM company - why do you think the restaurant gets the ATM fees?"

They may not receive them, in fact, all the atm deposits are in multiples of $20, so you may well be right. I am still going to ask as a point of clarity to cover my bases.
<edit>
--Thank you Joan

They may not receive them, in fact, all the atm deposits are in multiples of $20, so you may well be right. I am still going to ask as a point of clarity to cover my bases.

BTW - the ATM fees may be charged and kept by the ATM company - why do you think the restaurant gets the ATM fees? Their "benefit" may just be from having the ATM in their restaurant is in the (supposed) increase in cash sales it brings, rather than collecting the ATM fees. Cheaper than paying credit card fees? (which more folks would use if they didn't have an easy way to get cash?)

When I actually did bookkeeping (shudder) for a couple companies that had ATMs, typically the way it worked is that the retailer/restaurant fronts the money, manages the cash, fills the machine, and is reimbursed electronically. There would be one additional deposit per month for their share of the ATM fees. If they're charging $2 or $2.50 per transaction in fees, they should be getting a cut.

There is an establishment in my county of -- shall we say "dancing?" -- whose ATMs charge $10 per withdrawal for patrons who don't plan ahead. Trust me when I say that the bulk of the $10 stays with the dancing establishment; it is a profit center.

Also, you should suggest that the restaurant sets up a separate bank account just for the ATM. That's actually standard OP for these situations.

I think an extra account for the ATM is a good idea. As far as the fee revenue goes, I don't see any deposits on a regular basis that would cover the $2.00/each. Nothing noted from the ATM vendor that I can pick out anyway. At this point I'm trying to withhold any judgement either way as far as cash in and out goes. When I look at sales, gross profit, and COGS percentages of income, they do fall in line with what I'd expect, even when I compare against other similar clients (granted the others are not cash only).

Shudder is right. I've seen worse books than this, but these leave some things to be desired. I dropped a potential client late last year after they played games. The last I head from him was a text in ALL CAPS. I lost about 3.5 hours. I could have helped the guy, but he didn't want to play ball and his s corp had some major issues he didn't want to hear about, and he was not pleasant.

I'm writing out my question list now, anything specifically you would ask that helped you out in the past?

Thank you MD

Well, every client with an ATM I dealt with set up a separate account, so the only time I had a question on their ATM account was when it looked like they took money out of the ATM account for other purposes.

If you have to reconstruct this, ask for an estimated cash in ATM at end of year. They should be able to give an estimate; it should be a relatively low amount (a couple grand). Find out if there's a commission structure, and find out if he pays a lease/rent. Not much you can do at this point except do your best and get the client straight moving forward.

I do believe I found the answer and am waiting on confirmation. I'd forgotten about a series of checks that were cleared per bank, but were not recorded. I set those aside in an account as I worked until went to review after my last post this morning. The account I put them in is on the P&L. I do that for a suspense account so I can keep known distributions clean until I confirm anything else that needs to go there, and I clear it out before I finalize anything. I focus too much on the balance sheet sometimes and got tunnel vision on this stupid credit. The total of these checks that I noted as "suspense/ask client" are about what I am looking for. I was careful because when we met, they pointed to specific cash withdrawals that were done at the teller, just walking up and getting cash to put in the ATM. I had been assuming the checks that were written and not recorded were draws, and asked the question. If someone besides a signatory on the account went to the bank, it makes sense they would take a check, though I didn't necessarily point that out in my email. I gave them list of check amounts, the number and the month they cleared since I didn't have the actual check date. They were the only checks that were not entered whereas debit card/online payments not entered were numerous.

At one point this morning I looked at the clock at 3.00 am and realized I had been staring at the computer and doing nothing. I slept, ate and reviewed everything to send the email and now, hopefully, will get a positive response back. What I realized is that more cash was being put into the machine than was taken in via sales. That cash had to have come from somewhere because there's no way the ATM was going to deposit more to the bank than was ever put in (derp). Yet sales appears legit, notwithstanding further testing. Either ownership did it or someone. That was the part I couldn't get past for some reason. I've got to have an understanding of the underlying economics of the transactions in terms of debits and credits. I don't like to be out of balance!!! I really don't want to have a difficult conversation, but it is what it is, and it looks like I'll be ok. Anyway, thanks again to everyone for reading my question. It sucks working alone sometimes, I'm learning to get up and away, walk, etc, and come back.

It's been an interesting day.....