As businesses have received or are about to apply for the second round of money from the SBA under the Paycheck Protection Program, you should start thinking beyond the application process.
As a CFO, accountant or bookkeeper, your role is more critical than ever to help properly account for and use the funds procured through the PPP. If used on authorized expenses and accounted for properly, you will make the difference in proving up forgiveness.
You need to start thinking now about how to account for the money on your books. You will be required to show proof that the funds were used for their intended purposes, so take the time and set up accounts that either only account for your funds or accounts that have limited use. This will make it easy to distinguish the proper transactions from your normal business.
From an accounting standpoint, there is no guidance on how to treat the funds on your books. However, there is tax guidance that forgiveness will not be deemed a cancellation of debt such that it becomes income. That said, you should follow the common practices involved with a debt that has been forgiven by a lender until there is more guidance.
Here’s what you should do.
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