Recently I talked all things related to the Paycheck Protection Program (PPP)—from loan application to forgiveness—with ADP's service specialist, Erron Stark, who delivers first-class services and solutions to the accounting community nationwide.
ADP’s Account Connect is a fully complimentary service provided to the accounting community and an invaluable resource. It offers a myriad of tools and resources, including coverage of COVID-19 legislation, reporting sheets and other new information and tools that are coming out all the time answering the needs of CPAs as they navigate these difficult times.
“... if you didn't have a partner or a process in place to manage payroll ... I don't relish those particular individuals right now.”
The Return of Payroll Relevance
PPP and payroll…do you want to be a perfectly organized business with a CPA firm that's fully informed and able to give you the best advisory input possible? Then your payroll has to be on point.
With the acceleration of advisory services and consulting, a couple articles have been released by thought leadership publications that place payroll as the entry point to consultative or advisory practices.
“If you didn't have automation, if you didn't have a system of record when it came to payroll for your clients during this time period, you’re probably struggling a little bit to facilitate the application side,” Erron said. “Even certain elements, such as Social Security deferral and some of the tax credits that are eligible during this time period—if you didn't have a partner or a process in place to manage payroll...I don't relish those particular individuals right now.”
Let’s look at some of Erron’s tips for navigating loan forgiveness.
PPP’s Eight Weeks of Worry
New guidelines are coming out daily in terms of loan forgiveness. It’s frustrating, confusing, and frankly—who has time for that right now?!
From ADP to you, here’s how to handle it:
Be patient. Information is still being released and the language around repayment and legislature fine-tuned. So hang in there.
Speak to your lender. Lending institutions are working hard to get you the information you need and have it streamlined into applicable tools. ADP has been working closely with their own banking partners, and according to Erron, “They are doing a tremendous job of making sure that they have all the different information and data points that are going to be required in order to make this as efficient and as painless a process for their clients as possible.”
Speak to accredited payroll institutions. This is their wheelhouse; trust in them to guide you through this. It’s finally their time to shine.
Look to accredited accounting institutions. The amount of altruistic pooling of information has been amazing, and it’s the perfect resource for you to consult to figure out forgiveness and how to appropriately maintain your books in the coming months to satisfy the demands of the IRS and lending institutions. Start with AICPA—they’ve got this covered!
You’ve Read the 11-page Document Released by the SBA. Now What?
The dizzying PPP Loan Forgiveness Application lays out the maze of “how-tos” but what about the “when”?
“Lenders, once they receive the information, they have 60 days to process the loan,” Erron said. “What I'll say is that I think a lot of organizations are probably going to wait until the latter part of June before they even start applying.”
Here’s what your lending institution is waiting for:
- Payroll. “You’ll need to know what your forgivable payroll is going to be. So, ADP is producing a couple of reports that are actually live in-market today that give you what your payroll costs have been over that time period since you received the loan,” Erron said. Whether you use ADP or another service, be certain to have your eight-week report, which should include an eight-week report from the same time period the previous year.
- Guidelines. Again, guidance is still being released. “Necessary information that relates to FTEs and other nuances is still to be released by the Treasury and the SBA,” Erron said. “There are coalitions out there trying to make sure that this is done in the best interest and the best spirit of what these loans were intended for.”
- Employee Retention. The spirit of the loan is to make every effort to retain employees. For some industries that will take longer than others to get those employees back.
It’s incredibly gratifying to watch the interdisciplinary work being done by accountants, banking entities, the SBA, and service providers like ADP during this chaotic period. CPAs are also freely sharing PPP worksheets on social media. Despite the difficulties we’re all facing, it’s encouraging to know that the attitude of financial professionals is one of solidarity.
With that ethos of generosity, ADP is providing free reports to accountants that give “the total payroll level for the company, but also the employee level needs as well,” Erron said. “Those reports are going to be available as of right now…and then we are currently in the process of developing comparison reports.” Those reports will mirror the eight weeks of the PPP loan against the same eight weeks of the previous year.
“I would say patience is a virtue right now...to make sure that you don't give back too much or don't owe too much—whatever the case may be. We're making sure that we're taking our disciplined approach.”
There’s an entire field of professionals working to streamline this process with new information and best practices coming out weekly. With this in mind, Erron emphasizes patience.
“Accountants and the clients are anxious to set aside what is going to be forgiven,” he said. “I would say patience is a virtue right now...to make sure that you don't give back too much or don't owe too much—whatever the case may be. We're making sure that we're taking our disciplined approach.”
Human Resources Software for the Win
ADP does an awesome job of payroll reporting and compliance work, but at the end of the day, all that information needs to be filtered through the CPA and applied as advisory insight to help your clients get through this. For a number of reasons, HR Software will be the CPA firm’s best friend, and here’s why:
- HR software is going to help you help your clients figure out cash flow numbers.
- You now have payroll tax credits that you can look at and see for each client how it specifically applies to their situation and easily create a 941. This means you are able to offer tax planning to your client bases. You could really make a difference in their lives.
- When it comes to the FFCRA, CARES Act, retention credits, paid sick leave and the FMLA: Your clients will be eligible for these things, or their employees will be. A payroll application is the tool that will allow you to track all the necessary data.
- HR software will allow employees to properly communicate with their employers around any number of sensitive issues, like a fear of returning to work, family health concerns or other concerns. Employers will need all of this properly documented.
- In the past, smaller businesses may have thought that HR toolkits were for larger companies, but COVID-19 is a leveling act, and the most important things are documentation and an ability to track your business’s numbers, no matter your scale.
- Organizations that have applied for and received PPP loans are now dealing with the requirement to bring back employees. This is proving to be difficult because other, richer programs were developed at the employee level causing friction. ADP has developed tools that enable employers to document those specific communications and engagements appropriately.
- ADP is developing services based on what they’ve learned from foreign economies that have come out on the other side of this and are successfully reopening, and they’re providing this information in a consultative manner to all partners and clients.
In this new corporate world, I hope that small businesses—CPA firms included—have really and truly digested the message that automation is key. The only way to serve your clients and small business employees efficiently and with purpose is by making the leap to digital. A big part of that is providing payroll options because it is not just about filling out that 941.
CPA firms that were using partners like ADP or had digitized payroll reporting in place had an easier time with PPP applications. You have to run your firm like the past will repeat itself. If you treat the last few months as an anomaly and choose not to go in the digitized direction, you should worry about your ability to navigate the next storm and be there to the best of your abilities for your clients. Let’s unilaterally call for a moratorium on doing payroll by hand!
“Nobody's seen this before. It's really hard to appease the masses right now when everybody wants definitive answers.”
Unprecedented Times and Lessons Learned: Keep Your Head on a Swivel
Erron says he has never in his life read and digested so much material so quickly. Since March, it has become very clear that people in the financial advisory world are working the frontlines of the economic crisis, and that extends to those providing payroll and HR tools.
“Nobody's seen this before. It's really hard to appease the masses right now when everybody wants definitive answers,” Erron said. “It’s an unprecedented time, and people are looking for this very precise and prescriptive way to handle this situation. I think we initially tried to deliver on that. But right now we're trying to do things in an expeditious fashion. But at the same time, we want it to be accurate. In today’s environment you have to be nimble, be patient, and be ready for pretty much anything.”
“In today’s environment you have to be nimble, be patient and be ready for pretty much anything.”
As we move past loan season and into loan repayment season/tax season 2.0, Erron has some pointers for next steps:
- Empower yourselves with free information! The ADP website is full of resources for the general public and for CPAs.
- There’s $600 billion of additional funding outside of the CARES Act. Help your clients find an accredited institution that can show them other ways to think about the economic disaster recovery loans. There are a number of state and local lending programs to pursue, as well.