PPP Expense Tracking

[bantar]

Well, I put together a spreadsheet to track my payroll spending.   The payroll spending starts after funds have been dispersed.    I need to spend a minimum of 75% against payroll  After 2 pay periods, I'm in trouble!   Not spending enough.   I've recalled a furloughed worker and he's balking....   "I have a weakened immune system", "I'm not feeling good right now", etc.   Another isn't being recalled.   I've immediately boosted everyone's hours, and have hired a new guy, made an offer to another and will likely replace my furloughed worker.  The good news is that I'm spending all of this on my employees!  They are getting a boost and I'm using the PPP as it was intended.... for them.

I was surprised that I was running so far behind.  It's but a small 8 week tracking window, so I only have 6 weeks left to make adjustments.

All my advisors are stating that we need to track our expenses very closely, so I'm doing this.

[chuor]

You are right! Employees whose on UI would received more payout from UI and PUA while on furlough instead of working and getting pay less. Naturally, they would just stay on UI instead of coming back to work. 

We had retained all of our employees but on reduce hours. We ran into the same thing with not spending enough PPP for payroll but we just add hours back temporally to offset that.

I hope we all will get through this! 

[rpllib]

I also saw using the funds as a challenge, and worried about getting to the end and being surprised by the results. I created a whatif spreadsheet that compares the current week to their average hourly wage for 2019(all the dollars earned in 2019 divided by all the hours worked, and then then that 2019 "hourly average" times current week hours worked. ex:

$60,000 earned in 2019

2234 hours worked in 2019

$26.85 paid for every hour worked in 2019

If my guy worked 45 hours in week one of the eight week expense period, and earned 1042.50(using his standard pay and/or productivity based pay plan), but would have been paid $1208.25 using his last year average (26.85 x 45), then we are paying a bonus to make up the difference. In this example, an additional 165.75. 

The spreadsheet then projects that out over the eight week period and gives us a total to compare against our total funded amount, to met the 75% requirement, so we can make adjustments along the way. We just completed week 3 and are on track to use most of the funded amount. 

It has really helped us see the end result. We used 2019 wages to determine the amount of the ppp loan, it makes sense to me, to pay them based on no less then their 2019 average, regardless of what their typical pay plan would net them, under the current less then ideal circumstances.

You might consider using the 2019 numbers to check current earnings against. 

Randy

 

 

[bantar]

I'm finding it difficult to hit the 75% spending.   Many of my employees have been getting overtime and bonuses and I've not dented the under-spend much given some mid-cycle-yet-normal turn-over.  I call them tool bonuses and encourage them to buy that tool you wanted or needed.    But, they are free to spend their money how they want.  We do have a number of new tools now in the shop.    As long as I'm not giving myself a bonus, bonuses already confirmed as ok, just minding the total salary cap per person.

I didn't start hiring again until PPP, but then it's hard to hire on a short clock and spend as needed.   I'm ready to spend more than the 75% if I can get people on board.

I was worrying about this last night and today, I saw this video on LinkedIn from Bryon Boyer , Attorney at Law, Business and Tax and Cryptocurrency Tax and Asset Protection.  He gives a nice summary of  the new PPP Flexibility Act of 2020.   It was signed by the President today (6/5).  He talks about lowering the 75% to 60%, but no forgiveness for < 60% vs a prorated forgiveness if less than 75%.  I'm OK if the number is 60%.   There's something about 8 weeks being extended to 24 weeks, but I'm not sure I completely understand this.  I think it's to deal with folks that may still be shut down and unable to hire.   Further, some forgiveness for folks recalled but not agreeing to come back (I have one of these).

[rpllib]

I really believe the new flexibility act passage will negate most concerns with being able to use the funds correctly, and/or using all the funds.

The best advice i have heard today, is to use all the funds for payroll over the new 24 week period(or as long as it lasts), to make the forgiveness end of this a no brainer for the lending institution. The actual quote is:

 

"We recommend trying to spend 100% of the loan amount on payroll over the 24 weeks. That will make the application process much easier since you will only need to provide payroll reports to support your forgiveness application. " 

and 

"Although utilities, health insurance, SUTA, and other small costs are still eligible, they become less important. Rather than worry about tracking small receipts, focus on big items that are easy to provide to the lender—payroll primarily, and rent. This should make the forgiveness application process quick and easy."

 

It sounds like we won't even be applying for forgiveness until 2021 since they extended the "rehire clause" to 12/31,  and the no interest clause from 6 months to 10 months after the end of the  end of the covered period. 

This quote is worth watching and strongly considering for your 2020 tax planing. I suspect in many cases, profitable shops will have a tax bill in the 20-30% of the PPP funded amount against year end taxes:

"At this time items paid with PPP funds are not deductible expenses. There was previously talk that Congress would revise it so the items would be deductible. However, given the favorable changes to the program passed here, there may be less motivation to do so."

 

Every way I look at it, this is one hell of a GIFT.

[bantar]

Thanks for the update @rpllib   I spoke with my CPA yesterday afternoon and we're doing the same.  100% will be spent on payroll.   We're ok on headcount.   My CPA is still thinking that the taxes noted here are not consistent with the initial PPP desire to help.   There's a chance they may review it later as the final 2020 tax rules are prepared.  But for now, as you noted, taxes are due.   

Bad news for my guys.... the gravy train dried up.  Even still, I'm happy as we've made their lives better with some "found money" (bonuses).