Who is this for?
Organizations who applied for and received a Paycheck Protection Program (PPP) Loan as part of the 2020 CARES Act response to the the global COVID-19 pandemic.
Congratulations! You were approved for PPP loan proceeds. So, what do you do now? Let's go through a couple ways to handle tracking expenses covered by the loan.
One of the key components in this process is making sure you have EXCELLENT record keeping to be able to provide adequate reporting and documentation to apply for loan forgiveness. CDM+ makes this easy with account sets. You can also use a separate bank account to manage PPP funds and expenses. Here's how to use each technique to manage your PPP loan.
* A minimum of 60% of the forgivable amount must be compensation.
Tracking expenses in CDM+
CDM+ offers the option to create account sets. This allows you to quickly run reports pulling all general ledger accounts that would be included in your PPP Loan expenses.
To create the account set:
- Go to Program → Accounting → Account Sets
- Click Add
- Name the set (Example: PPP Expenses)
- Click OK
- Click the Select Accounts button
- Select the Account Browser tab
- Click Change under Browser Options
- Group by Type, then Category
- Click OK under Browser Options
- Expand expense accounts
- Select categories and accounts to use in the set by checking them
- Click OK
- Click Save
To produce a report of expenses covered by your PPP loan:
- Go to Reports → Ledger Reports → Activity → Ledger by Accounts
- Enter a date range, such as from the start of your loan until now
- Click Selected Accounts
- Click Load Set
- Check the PPP Expenses set
- Click OK
- Refresh your report
Using a bank account
Many CPAs and banks are advising businesses receiving PPP Loan proceeds to create a new bank account and general ledger account to keep monies separate from their general checking account. If your bank or CPA has recommended this, these next steps will help you set this up in CDM+.
Set up a separate account at your bank
Contact your bank to set up a new account. It can be a savings or a checking. Having a savings account is a little easier, as you do not have to order new checks, track separate check numbers, etc. Using a separate bank account from your regular checking ensures you are not co-mingling funds and provides an additional way to track the expenses used for the loan, if you are wanting loan forgiveness.
Set up new accounts
In your chart of accounts:
- Add a new asset account for your new bank account
- Add a liability account for your loan proceeds
- Add these accounts to your PPP account set
Make a journal entry to record your loan:
- Debit your new asset account
- Credit your PPP Loan Payable liability account.
Do not touch your PPP Loan Payable liability account until you have been notified that your loan has been forgiven or at the point that the loan repayment is required.
Use your regular bank account as you normally would for expenses that would be covered under PPP guidelines. You will then transfer funds from the PPP asset to your primary account to cover these expenses.
- Create one or more ledger entries for covered the expenses from your regular checking account
- Transfer funds at the bank from your savings account to your regular checking
- Add a journal entry to debit your regular checking asset account and credit your PPP Loan savings account. Note the expenses prompting this transfer in the description
You can combine a Ledger by Accounts reports as described above with bank statements to provide two independent reports of covered expenses.
Keep copies of all invoices for expenses other than salary/wages in a separate folder for PPP tracking. Include copies of checks or ACH transfers. Even bank statements during your loan period time will be beneficial.
For payroll expenses, save a PDF of your payroll posting report or the payroll period detail per payroll ran during the loan period.
Always keep more documentation than what you think is needed for covered expenses. Better to be safe than sorry!
For additional questions regarding the PPP Loan:
Link for newest changes/information regarding PPP Loan:
Application for Loan Forgiveness: