What to do with PPP Money
Now that the government has started to send small businesses money under the Paycheck Protection Program, businesses need to understand what this money can be used for to qualify for loan forgiveness.
The money can be used for payroll, including vacation and sick pay, as well as health benefits. It can also be used to pay your mortgage, rent and utilities. Since the main purpose is to help businesses continue to pay their employees, at least 75% of the funds need to be spent on payroll.
At the end of the 8-week period, your business will need to provide verification that the funds were properly spent. To make this simple, we recommend that you start tracking the related expenses.
You can track the expenses in a few different ways. First, you could set up an account specific to the PPP and track all related expenses within the account. Second, you could assign a tracking category if you use Xero or assign it a class if you use Quickbooks. If you do this, at the end of the 8-week period you will be able to run a report that shows all the expenses related to the PPP. The third idea would be to create a spreadsheet to track the expenses, complete with expense type, date and amount.
It is very important that you use these funds for only the expenses allowed so you can have the entire amount forgiven. Otherwise, it becomes a loan to your business that will need to be repaid to the federal government.
If you have any questions, please contact us!