Quickbooks Online 7 Tips for Recording and Tracking PPP Loan and Expenses

What's up guys it is V here, and in this video I want to share with you my QuickBooks Online tips for keeping track of your PPP proceeds, but before we begin I want to say that these tips do you not substitute for working with your accountant. You really should be working with your accountant during this time. But with that said let's get started.

First thing we want to do guys is record the proceeds from the PPP loan and we are going to start with recording the initial receipt. What we want to do first is create a Long Term Liability account. I know some would argue that it should be a current liability because we have only 8 weeks to use it to be considered for full forgiveness, but technically it is still a two-year loan, so I'm gonna stick with Long Term Liabilities. Ok in detail type I'm just gonna select Other Long Term Liabilities - doesn't really matter that much - and let's call it... lets go with PPP loan see save and close. 

Now that we have the account set up we want to record the receipt of the loan so I'm gonna do this by creating a transfer. Let's assume that we got the loan on April 13. In Transfer Funds From, I'm going to select PPP loan. That is the source of our funds, and then in Transfer Funds To - I'm going to select whatever bank account is holding the funds, so I'm gonna pick Checking. And let's assume that we received $1,000,000 in PPP funds and save and close. So in our chart of accounts, there it is, the $1,000,000 in PPP loan. 

So at this point all we really have to do is match the transfer in the bank feed and after that we're not planning to touch this PPP loan account again until we find out about debt forgiveness. Okay now we're gonna fast forward to when we find out how much of our debt has been forgiven. Whatever balance is forgiven, part of that will be from the initial loan and part of that will be interest that has been accruing on the loan. So we want to set up two more accounts. The first one is going to be an Other Income account and this is where--this is the account we're going to use to record the total that has been forgiven, so it's just Other Miscellaneous...and we'll call it PPP Debt Forgiveness, pick Save and New. And then the next one we're going to create an Other Expense account for the--for the interest. Oops, Other Expense...Other Miscellaneous...

Let's call this PPP Interest. Save and close. Okay next thing we want to do is create a journal entry. Let's say our debt was forgiven on July 1st and we're going to assume that the entire loan has been forgiven, including the interest and let's say that would be $1,667. Let's set that up, so we're going to debit the PPP loan for the $1,000,000. That's the full loan. --is that $1,000,000? yes-- We are going to also debit the PPP interest for the amount of the interest $1,667, and then we are going to credit the PPP debt forgiven for the total. Save and close. Okay so when we look back at our chart of accounts...there it's been wiped out of our loan account. And in the Profit and Loss, we can see the PPP debt forgiveness and the PPP interest. 

Now if it turns out that there's some part of your debt that's not forgivable, I mean that sucks but at least we already set it up as a long-term liability so at least we wouldn't have to worry about any reclassifications of any balances, which now that I'm saying it I realize it's not much of a consolation, but oh well.

It is gonna be SUPER important that you keep pristine record and documentation, I mean that's a general rule, but even more so if you are concerned about debt forgiveness, because I have a feeling that your records are going to be scrutinized, just based on how much of the PPP proceeds were already given out, so it might be a good idea to attach a copy of your source documents to the PPP expense transactions in QuickBooks, and I will walk you through the process. All right, let's pretend we're going to record a payment for our electricity bill, and it's gonna be this bill here... here's the bill and here's the payment.

For the--for the bill and we're just gonna create an expense for that, so New, Expense. Okay so I went ahead and I filled in the expense. Make sure that the payment  account is whatever account is holding your PPP funds, and then you're gonna just go ahead and fill in the expenses normal, except that down here you're also going to include the attachment of your source documents. It was what I showed you earlier, it's just a PDF of the bill and the the payment, and it can be a PDF file, it can

be a picture file, any relevant file you can attach. But before you attach it, you might want to come up with some sort of naming convention. So for me, I just put "PPP" in the front, and then the kind of expense, and the payment date. So that is ready to save. Go ahead and save and close.

Creating attachments in QuickBooks serves two purposes. The first one is that it keeps the source document and the record of the transaction together, and the second is that it creates sort of like a backup for your source documents. For example if you ever needed to download the attachments, you can just come here to the gear icon, and select attachments, and then so remember how I came up with that naming convention? It's so that it's easier to sort the PPP related transactions and I can select the related attachments and in batch actions we will select export, and that will create a zip file of your attachments.

My third tip is to notate each PPP related expense in QuickBooks. That's going to make it easier to track--and we'll go more into detail about that in tip number six--but I'm back in that expense that we just recorded, because I want to show you that in the description, along with the general--the general memo, I also just added a "PPP" at the beginning just to notate that this is a PPP related expense.

For PPP purposes, if you usually combine your interest expense into one account, it might behoove you to create a subaccount for your qualifying mortgage interest. And yes, I did say behoove. So I'm just going to create a subaccount...and there it is. Okay so on a like different note, qualifying compensation is capped at $15,385 per employee for the eight week period, so if you are planning to pay more, than that you might also want to create a subaccount for salaries and wages as well, just to

separate out those qualifying amounts. You're gonna wanna make sure your books are up to date with all your expenses for PPP, and one of the best ways to do that is to stay on top of clearing out the bank feed, so do it as much as you can, and also keep on top of your bank reconciliation.

For debt forgiveness, we need to use the proceeds within the eight-week period on qualifying expenses, so we want a way to keep track of our proceeds uses, and here's how I would do it, and I'm using the assumption that any payments for qualifying expenses are coming out of our PPP funds. First, I'm going to go to Reports, and I'm going to select the Profit and Loss. All right, in the date range I'm gonna select the eight-week period so 4/13--I think we said-- and eight weeks would be June 7. I'm going to select cash basis and then run the report. But I only want to display the qualifying costs, so I'm gonna go to Customize and in Filter, under Distribution Account, I'm gonna select all the qualifying expenses. 

After you check off all the qualifying expenses and you re-run the report, you're gonna get something like this, so you only have your qualifying expenses listed, and here is the total of how much of the proceeds was spent to date. I actually forgot one thing, I'm gonna come back up here and I'm going to select percent of column and run report. Now we can see the expenses as a percent of the total proceeds used to date. Remember that at least 75% of our proceeds has to come from payroll costs,

and in our example we have Wages Paid and we have Employee Health Care, but other qualifying payroll costs would be retirement plan contributions, you can also do allowance for dismissal and separation, and paid leave of absences like sick pay, vacation pay, etc., but it has to equal at least 75%. 

So I can see already that were a little bit under, so something that we're gonna want to watch out for but now that we set up this column, it's a little bit easier to

see and keep track. So we're gonna go ahead and save this customization. Let's call it PPP Proceeds Use Summary, and save. The report will get updated as your books get updated, and if you want to reference your report at any time, you just go to Reports, and Custom Reports, and you just click on the name of the report. And there's the report. Ok now that we have this report set up, we want to just do a quick check to make sure that the transactions that are included in these accounts are legitimate. We don't want any miscategorized transactions to have mistakenly been recorded to any one of these accounts. 

So we're just gonna open it up to look at the detail. And then remember how we notated which transactions were PPP related? So this is why we did it, so we could do a quick check. I can see here that one of these does not say PPP--is there any other? no--okay so we have one that says fees so we just want to quickly change that to the correct account, and save and close. All right and then just do a quick double-check. Awesome.

This last tip is more for general tip than a Quickbooks tip. You want to make sure that you can use up your PPP proceeds towards qualifying costs within the given period of time, and remember that at least 75% of those proceeds has to be towards payroll costs if you're planning to apply for debt forgiveness. But if I'm not mistaken pay increases made within the last 30 days we won't count towards qualifying payroll costs, so you can't just be towards the end of the eight weeks, "Oh, I still have a lot of proceeds to use up, I still have a lot to allocate towards payroll costs, I'll just give everybody bonuses". It's not going to count...that is if I'm interpreting it correctly. So my tip is to start planning out your expenses, start mapping them out so you have some sort of plan that you can refer to. Alright guys, thank you so much for joining me in this video. Please hit that Subscribe button for updates on the latest. See you later!