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3 tips to record and track your Paycheck Protection Program loan

Editor’s note: Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.

If you receive a Paycheck Protection Program (PPP) loan, tracking how you spend it is an important part of applying for loan forgiveness. Before applying for PPP loan forgiveness, borrowers will need to organize their documentation, including information regarding payroll, mortgage interest, rent, utility, and other eligible costs paid using the PPP funds during the loan forgiveness covered period.

For loans made on or after June 5, 2020, your loan forgiveness covered period is 24 weeks. For loans made before June 5, 2020, you can choose to use either an 8-week or 24-week loan forgiveness covered period.

As a reminder, your PPP loan may be forgiven, in whole or in part, if you meet certain requirements. The way that you use your PPP loan impacts your potential loan forgiveness. Here are some included uses*:

  • Eligible payroll costs
  • Mortgage interest payments on mortgages incurred in the ordinary course of business before February 15, 2020
  • Rent payments under leases dated before February 15, 2020
  • Business utility payments for electricity, gas, water, transportation, telephone, or internet access under service agreements dated before February 15, 2020
  • Certain employees identified in the statute, including additional wages paid to tipped employees

Please note that your total forgiveness amount depends on other criteria as well. For example, salary, wage, or headcount reductions during the covered period after you first received your PPP loan proceeds from the lender may reduce the forgivable amount for some borrowers.

Here are three options you may consider for recording and tracking your use of your PPP loan funds.

1. Open a separate bank account for your PPP loan

“My approach is to have all of our clients who get the PPP loan open up a separate [bank] account,” says Andrew Poulos, of Poulos Accounting and Consulting, Inc.

From there, he has his clients deposit the funds from their PPP loan into this new operating account.

“Then, for the next eight weeks, they’ll pay out all their payroll, rent, utilities—everything that qualifies—from that account,” he said. “So there’s a line-by-line record of their spending.”

The reason for the separation is simple.

“Say you have $20,000 in your operating account today, and you get a $30,000 PPP loan,” says Poulos. “When you put it into the same account, you have $50,000. From there, you start paying out the qualified expenses, as well as other non-qualifying expenses. How is a bank or underwriter going to know if you used your money or the loan money for expenses that do not qualify? It gets messy.”

Poulos says he understands that setting up a new bank account and moving over all those expenses for just eight weeks can be frustrating.

“As painful as it sounds, having a separate account for this loan and maintaining good recordkeeping [may] provide the best results,” he explains. “Once the loan period is done and you apply for loan forgiveness—and [if] it’s approved—you will have copies of all your bank statements on hand. Those can be used for tax and accounting purposes, and you can always close that account if you decide not to keep it active.”

2. Manually track your loan in a spreadsheet

Many business owners may want to take spending visibility to another level by laying it out in a spreadsheet. Luckily, Chris Macksey and the team at Prix Fixe Accounting have a PPP loan tracking template already set up.

“I wanted to create this spreadsheet because so many business owners need a helping hand right now,” says Macksey. “Hopefully they just received their PPP loan funding, and now they need a way to keep track of it so they can [apply to] get their loan forgiven in part or in full.”

Macksey’s explainer video covers the various components of his spreadsheet: the sections that are editable, the sections that are necessary for tracking, and more. He explains how the spreadsheet tracks when your payments are due, based on the loan distribution date. And he talks about how an Economic Injury Disaster Loan (EIDL) emergency advance affects your overall PPP loan as well.

Macksey laid out columns in the spreadsheet for different payroll expenses that are considered forgivable. This is where you would include gross wages or salaries, cash tips, health care benefits, and others. This section is separated from “other covered expenses.” The spreadsheet tracks one against the other, so you can monitor your spending in accordance to the PPP 60/40 guideline. To be forgiven in whole or in part, at least 60% of your spending must be on eligible payroll costs, in addition to certain other requirements.

Take a look at Macksey’s video, and make yourself a copy of his loan forgiveness spreadsheet to give it a try.

3. Track your PPP loan funding and spending in QuickBooks

Spreadsheets aren’t the only way to track your loan. Your payroll accounting software may have another solution.

For a step-by-step guide on how to track your use of your PPP loan funds in QuickBooks, check out this resource by Alicia Katz Pollock and Megan Genest Tarnow.

They’ll walk you through creating a long-term liability account in QuickBooks, categorizing expenses, and running reports. The article even gives some helpful tips for nonprofits, which have unique and essential reporting needs.

While there are certainly other ways to track your spending of your PPP loan funds, these resources may give you a good starting point.

And speaking of starting points, if managing your business’s accounts makes you nervous on a good day, it might be time to consult an accounting professional. An accountant may be able to help you track and navigate your PPP loan and apply for loan forgiveness.

*The uses listed above are ones that may be covered by loan forgiveness (“covered uses”) and are not the only allowable uses of a PPP loan.

Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly and the below information may be outdated. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.

The resources described above are made available to businesses within the United States of America.

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