How to Track Loan Expenses for PPP

How to Track Loan Expenses for PPP

Receiving your Paycheck Protection Program (PPP) loan doesn’t mean the hard work is over. For the loan to be forgiven, you must spend the funds on qualifying expenses within an approved period after the disbursement—and carefully track that spending. Providing detailed and specific information on how your PPP funds were spent will be vital to having your lender forgive your loan.

How Do I Track Eligible Expenses?

The federal government has not released guidelines for tracking eligible expenses. Still, you eventually will have to submit a loan forgiveness application and supporting documentation to your lender. Each lender may have different requirements for what it considers to be acceptable proof of spending. There are several different methods you can use to track eligible expenses in preparation for applying for PPP loan forgiveness. The most common way is to track using accounting software. But if you do not have existing accounting software do not want to alter your chart of accounts you can a spreadsheet program, like Excel or Google Sheets. If you choose to use a spreadsheet, here are a few tips to help keep you organized.

Make Separate Tabs for Each Expenditure Category

This is where you will post each transaction in detail. Make sure to include the date, vendor, amount, and any identifying number with each transaction so it can be tracked back to your accounting system and bank account easily.

Make a Summary Tab That Shows Your Loan Income

Make sure the tab lists summary numbers for each expenditure category as well as a net amount. You should be able to link the summary number cells to the total on the detailed category pages to eliminate manually transferring the numbers. This will make it easy to see how much you’ve spent in each category in comparison to the whole PPP loan disbursement amount. This summary sheet can act as your profit and loss report when it comes time to apply for loan forgiveness.

Create a Formula to Track Expenditures

On your summary page, create a formula that will tell you how much of the expenditures are payroll-related and how much are other expenditures. This will help you monitor your payroll costs and make sure you’re following the rules for loan forgiveness.

A spreadsheet might be easier to use and manage than your accounting software when it comes to tracking PPP expenses. However, keep in mind that manual entry can be time-consuming, and spreadsheets are more prone to entry errors so double check your numbers. Make sure all entries are accurate and as detailed as possible. Being vague in this area will not win you any points with your lender when you apply for loan forgiveness.

Acceptable Proof of Spending

• Verification of full-time or full-time equivalent employees paid and their rates

• IRS payroll tax filings

• State income, payroll, and unemployment insurance filings

• Verification of payments made for mortgage or lease obligations and utilities

Mapping Eligible Expenses Under the PPP

When tracking expenses for the PPP loan forgiveness as determined by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), make sure to look at: •

• Payroll costs: Salary, wages, commissions, or tips along with employee benefits including vacation, parental, family, medical, or sick leave as well as health care benefits and premiums, and retirement benefits.

• State taxes

• Sole proprietors and independent contractors: Wages, commissions, income, or net earnings

• Interest on mortgages: Obligations must be incurred before Feb. 15, 2020

• Rent: Lease agreement must have been effective prior to Feb. 15, 2020

• Utilities: Service must have begun before Feb. 15, 2020

Will I Have to Pay Back Some of the Loan?

Maybe. The idea behind the PPP loan for small businesses is to help people stay employed and keep firms from going out of business. As such, you will be required to prove you spent 60% of the PPP loan proceeds on payroll-related expenditures.

If you spent any of the loan on things determined to be ineligible for forgiveness, you may be required to pay those amounts back.

Bottom Line

When it comes to your Paycheck Protection Program loan being forgiven, it will all come down to the details. If you don’t track your spending well or at all, your loan may not be forgiven. However, if you have tracked your eligible spending carefully and can provide backup documentation, you may not have to repay any of the loan.