ABC Solutions

Managing Your PPP Loan for Maximum Forgiveness

Congratulations! You are one of the lucky recipients of the Paycheck Protection Program Loan. Not everyone can say the same. Once you receive approval, the bank has ten calendar days to disburse the money. As soon as you receive those funds, the 8-week clock begins to tick. Do not waste time.

For the eight weeks immediately following your loan funding, your expenses must meet certain criteria if you hope to have the loan forgiven. Loan forgiveness is not automatic. You will have to apply for it prior to repayment in six months. Currently, there are no guidelines for the forgiveness application. They will share that information as they develop it.

Using the Loan Proceeds

The entire purpose of the PPP Loan is to maintain payroll. Naturally, using the money for payroll is high on the government’s agenda. Therefore, you must use 75% or more of the money for payroll costs. If payroll costs in the eight-week period do not exceed 75% of the loan proceeds, the amount of loan forgiven will be reduced by the shortage. Payroll costs include:

  • Salary, wages, commission, and similar compensation
  • For Partnerships – Guaranteed Payments to Partners AND partner’s share of income subject to self-employment tax
  • Vacation, sick, family leave
  • Severance pay
  • Group health insurance premiums
  • Company portion of retirement benefits
  • State and local tax assessed on employee compensation, such as unemployment, SDI, etc.

WARNING: You may think, well, if I cannot make the 75% in regular payroll, I’ll just bonus myself the difference. Be very careful about unusually high bonuses or commissions to trick the system. You will need documentation. I anticipate random audits and reviews of PPP loan proceeds over the next two years. Free money from the government is a prime opportunity for rampant fraud.  Additionally, your employee count must not dip below 25% of your January 31, 2020 employee count.

Not more than 25% of the loan forgiveness may be attributable to non-payroll costs, such as rent, utilities, and mortgage interest. All expenses made in the eight-week period must be for “costs incurred and payments made” within that eight-week period. While this hasn’t been clearly defined, we can assume that you cannot pay your rent six months in advance with the money, nor pre-pay your utilities.

TIP: If you have rent, mortgage, or utilities on autopay, take them off now. Be sure to pay the bills inside the eight-week period for periods included in that eight-week period.


If you do not keep accurate time records of your employees’ work, now is a great time to start. You will need proof of commissions, bonuses, pay raises, and vacation/sick time. You will also need to prove that any time off does not overlap with the payroll tax credits of the Families First Coronavirus Response Act (FFCRA). Have all time accurately recorded. Salaried employees do not need to keep time unless they are taking paid time off. Those hours should be clearly documented as to the purpose and length of leave. The FFCRA has more detailed documentation requirements for the employment credits.

Keep and store copies of your rent and utility bills. Utilities include gas, water, electric. Utilities do not currently include internet or cloud hosting at this time. You are required to maintain these records for four years.

Update Your Accounting System

Create a separate account in your accounting system for COVID-19 Expenses and create a list of sub-accounts. Here is a picture of mine:

Be very careful over the eight-week period to carefully post information into the correct category. You want to be able to easily run reports to track your expenses for forgiveness. A quick rundown of the sub-accounts above.

  • Employee Family Leave and Employee Sick Leave were created to track FFCRA time off for employment credits. You must keep this separate from other payroll records.
  • Group Health and Salaries are to track payroll in the eight weeks separate from payroll in the other parts of the year.
  • Rent and Utilities for tracking those expenses during your eight weeks and separating it from other regular expenses
  • Optional items for your use only are Internal Costs and MSP Tools for Customers. You will not use these for loan forgiveness, but items purchased specifically for the pandemic can be tracked here to not interfere with other metrics in future/past years for comparison purposes.

Forgiveness – What to Expect

There is another really great reason to separate these expenses. The portion of the loan that is forgiven is technically income to you. The federal government has stipulated this will not be taxable for federal tax purposes. Sounds great, right? Of course! However, there are other considerations.

Be aware that not all states follow the Internal Revenue Code and unless your state specifically excludes the loan forgiveness, you may find yourself paying state income taxes on it.

Also note that it is entirely possible that the expenses that allow the forgiveness of the loan may not be deductible on your tax return, thereby making the loan a complete wash. You (or your tax preparer) will want a nice easy way to find the expenses that are not deductible. Using my method above will go a long way to identify the non-deductible expenses.

It is not clearly stated at this point if those expenses will be non-deductible. At the same time, it is not clearly stated that they will be. We can expect future guidance from the Internal Revenue Service on this. Until then, play it safe and segregate your costs as much as possible. It’s better to be over prepared and not need it, than need it and not be prepared at all.


Stay safe out there!

CARES Act Stimulus Strategy

Now that countries around the world have stimulus packages in place, what is the best use of that money and opportunity?

In the United States, our government passed two packages in the past month. Your head may be spinning with the best course of action for your business. I have some suggestions. But first, allow me to offer a quick glossary of terms:

FFCRA – Families First Coronavirus Response Act – passed March 18, provides paid sick and family leave for your employees for up to 80 hours.

CARES Act – Coronavirus Aid, Relief, and Economic Security Act, passed March 27, 2020 to maintain businesses and workers.

PPP – Paycheck Protection Program – included with the CARES Act, provides forgivable loans to cover payroll expenses and other necessary business expenses.

EIDL – Economic Injury Disaster Loan – included with the CARES Act and provides immediate relief for payroll and business expenses. You can apply for this today at:


Prepare Documentation for Loans

Regardless of which program you choose to help your business, your company finances will need to be in order. Some loans will require documentation prior to offering a loan, others will require documentation after you use the funds. This article is to help you prepare. Contact your favorite banker and place them on notice that you want to apply for relief. They may be able to give you a list of documentation they will require. If not, use mine.

You will need proof of expenses, so your accounting system must be in order. If it is not, you have a small window of opportunity to get it ready while the SBA, states, and other agencies build guidelines in the coming weeks.

You will need to provide proof of payroll from 2019. The number of employees, the average monthly payroll cost, and average monthly payroll taxes for three months between February 15, 2019 and June 30, 2019.

You will need tax returns for the past two years. If you have not yet filed your tax returns, do so as quickly as possible. Additionally, you will need to provide support for rent payments, mortgage payments, and utility payments. Start now so you are ready when the banks are ready to help you.


Begin Tracking COVID-19 Expenses

Consider creating a bucket of expenses in your accounting system to track all expenses related to COVID-19. In this bucket, you should have some subaccounts:

  • Employee Sick Leave
  • Employee Family Leave
  • Salaries and wages
  • Payroll taxes
  • Health insurance premiums
  • Rent/Mortgage interest payments
  • Utilities
  • MSP Tools

You will need to separately track your payroll for COVID-19, especially if you obtain a PPP loan. Additionally, the FFCRA requires a separation for paid sick and family leave. These two items will be treated differently for the tax credits. Use your PSA or whatever time tracking system you use to manage this. Create a code for C-19 Sick/FML. This will help you obtain the proper credits for wage reimbursement un FFCRA. Create another code to track worked hours during the covered periods for PPP and EIDL. You will need to support your claims if you plan to apply for loan forgiveness.

Speaking of loan forgiveness, do not apply for these loans with the expectation they will be forgiven. Expect to pay them back and be pleasantly surprised if you later do not have to. This is not guaranteed free money.

The remaining expenses are self-explanatory, except for the MSP Tools. Many MSPs are helping their customers move employees to home-based work. This may include the offering of RMM seats, anti-virus, web security, and other tools you will use to keep them secure and patched. If you are not charging your customer for those extra seats as a gesture of goodwill, or even expectation, place those costs here. You may also want to track any internal expenses your company incurs in a separate expense account. At the end of this year, you should have a very clear picture of how much COVID-19 cost your business.


Develop a Strategy

The best course of action is to develop a strategy for using these funds. Consider creating a separate bank account for the money and use it for its intended purposes. For the PPP loan, your company expenses will be analyzed for the eight-week period following the loan origination date. The dollars you spend on payroll, utilities, rent, or mortgage interest will be added together for the forgiveness total.

Any remaining amounts of loan that were not used for those purposes will enter into a repayment schedule. However, if your company lays off employees, who make less than $100,000, during that eight-week period, the loan forgiveness will be reduced by the amount of the pay cut. If you have employees that you are considering letting go, do so before obtaining the loan so they will not interfere with your program.

While the PPP loan is paying your business-critical expenses, consider using the money you would have spent on payroll and rent to aggressively pay down existing debt, or increase marketing.

Develop a system for marking expenses for COVID to get them entered properly.

Meet with your accounting team and accounting professionals to build a plan that will use this money to keep your company running efficiently in the coming months. Develop a budget to only spend where necessary. Keep your eye on the budget and do everything you can to stay within it.

Stay safe. Stay healthy. Stay sane.

MSPs: Stay Ahead of the Curve

As the global pandemic brings business and the economy to a grinding halt, you may wonder what steps you can take now to protect your business, your employees, and your customers. lists the Information Technology Sector as one of 16 critical infrastructure sectors needed to stay open and operable during a national crisis. Here are some steps you can take right now to alleviate stress on your business.


The IRS outlined provisions for the Families First Coronavirus Response Act (FFCRA). The new law will take effect on April 2, 2020 and remain in effect until December 31, 2020. Here is a quick rundown of the provisions. Consider finding a way in your PSA or payroll system to track COVID-19 related leave separate from normal PTO.
– For COVID-19 reasons, employees receive up to a maximum of 80 hours paid leave
– Employers receive 100% reimbursement for the wages
– Employers face no payroll tax liability
– Self-Employed individuals receive an equivalent credit
– Employers with fewer than 50 employees are eligible for an exemption, but can voluntarily comply. Employers with 50 – 500 employees are mandated to comply within 30 days. Employers with over 500 employees do not qualify for the credit.

Complete details can be found in IR-2020-57 at: If your employees are forced out of work, please take advantage of this program to keep them paid.

Income Taxes

The IRS has announced the April 15 tax filing date has been moved to July 15, 2020. If your return has been filed and you wish to cancel your automated payment, you can call the IRS e-file Payment Services at 1-888-353-4537. This is an automated service available 24 hours a day, 7 days a week. This relief also includes estimated tax payments for 2020 that are due on April 15. Take advantage of this extra time to save for the tax balance due. Contribute to a SEP or IRA, since those deadlines are extended, too.
For information on your state income tax response, please see this link:

Inventory Purchases

Dust off your crystal ball and peer into the future for this one. There are two possible outcomes that will invoke Economics 101 – Supply and Demand. Hardware and computer supplies may become limited and pricing could return to that of a 1991 personal computer. Therefore, it may be tempting to stock up on computers now when the price is low. However, if the economy continues to sink, you could be left holding those computers with no one to sell them to. It may be a waste of valuable company resources.

Reduce stock and inventory purchases to keep on hand. You may need that cash in the coming weeks. Consider keeping only one or two computers on hand for a quick turnaround. Otherwise, only order equipment that your customers have paid for.

If you are not already doing this, immediately implement a policy in your company to collect on all hardware invoices prior to ordering. Now is not the time to extend credit needlessly. You will only harm yourself by charging the purchase to a credit card and paying interest on those charges if your customer slow-pays the invoice. If they want to slow-pay the invoice, they can slow-wait for the hardware.

The End of AYCE Managed Services

For those working around the clock to get your customers’ employees set up to work remotely from home, this is for you. You may have an all-you-can-eat managed service agreement that covers everything, and you may struggle with whether you should charge your customers for this extra work that no one saw coming.

The answer is, “Yes! Absolutely charge them.” These are new installations, new connections, and far outside the normal course of your managed services agreement. To be expected to connect 100 remote workers in 48 hours for free is unreasonable.

Explain to your customers how securing remote connections and the home offices of their employees is time-consuming and you want to devote all the resources possible to getting it right. This cannot be done for free. Offer to spread the cost over future months if it will help the customers, but remind them that you are still required to pay your people overtime for working to keep them safe and operational.

We already knew that the all-you-can-eat concept is going out of style. This pandemic may pave the way for AYCE to go the way of the leisure suit.

Check Your Subscriptions

You should do this on a regular basis anyway. Review the subscriptions you purchase and make sure you have a customer being invoiced for it. Often, we switch subscriptions like AV or security and fail to cancel the old vendor when the new one is implemented. Check each vendor to ensure you have a legitimate reason for sending them money each month. Are the bills accurate? Do you have any services you can consolidate for a lower monthly cost?

Stay Connected with your Financials

With so many other things needing our attention, it is easy to let your accounting system go. Don’t do it. If there is a problem with profits, you want to know that now, not later. Stay on top of the accounting reports, financial metrics, and any slump in revenue. Any changes should be scrutinized and corrected as quickly as possible.