LEGAL DISCLAIMER:
The information contained herein is for general guidance purposes only. It should not be taken for, nor is it intended as, legal advice. We would like to stress that there is no substitute for customers making their own detailed investigations or seeking their own professional advice if they are unsure about the implications of the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act) on their businesses.
While we have made every effort to ensure that the information provided herein is correct and up to date, Sage makes no promises as to completeness or accuracy and the information is delivered on an “as is” basis without any warranties, express or implied. Sage will not accept any liability for errors or omissions and will not be liable for any damage (including, without limitation, damage for loss of business or loss of profits) arising in contract, tort or otherwise from the use of or reliance on this information or from any action or decisions taken as a result of using this information.
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What can you use PPP loan for?
You should use the proceeds from your PPP loan on your Payroll costs include benefits
- Interest on mortgage obligations (canNOT be used to pay principal or prepay mortgage), incurred before February 15, 2020;
- Rent, under lease agreements in force before February 15, 2020; and
- Utilities, for which service began before February 15, 2020
What expenses are considered Payroll Costs?
Payroll costs include:
- Salary, wages, commissions, or cash tips (capped at $100,000 on an annualized basis for each employee);
- Employee benefits including costs for vacation, parental, family, medical, or sick leave; severance pay; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
- State and local taxes assessed on compensation; and
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
Expenses that fall under those categories are eligible for forgiveness. The following conditions will also apply:
The loan amount should be forgiven as long as:
- The loan proceeds are used to cover payroll costs, and eligible mortgage interest, rent, and utility payments over the 8-week period after getting the loan; and
- Employee and compensation levels are maintained.
Payroll costs are capped at $100,000 on an annualized basis for each employee. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. Loan payments will be deferred for 6 months.
NOTE: Additional information is listed below in the Additional Resources section.
Getting Started
For optimal record keeping, it is recommended that you open a new bank account to deposit the loan proceeds and track the related COVID-19 expenditures. Having a separate bank account is more audit-friendly, avoids comingling of funds and creates a clear audit trail. This will aid in maximum loan forgiveness.
Let’s assume that you applied for and received a PPP loan for $100,000 on 04/15/2020 and deposited those funds into a new bank account. The examples below will show you one way to record the loan and track eligible costs in Sage 100.
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Set up loan accounts
Create new accounts for tracking the loan
After you open a new bank account and deposit the loan funds. You will then need to set up a new G/L cash account and Bank Code in Sage 100:
- Open General Ledger, Setup, Main, Account Maintenance
- Create a new Main account and enter a description (For example: PPP Funds Account)
- Account Group, Current Assets
- Account Type, Cash and click Accept
- Open General Ledger, Main, Account Maintenance
- Type in the account number you created in previous step and click Accept
- Open Bank Reconciliation, Main, Bank Code Maintenance
- Create a new Bank Code, select the G/L cash account number you created in step 2 above.
Create a new liability account for the PPP loan. Until you know how much of the loan will be forgiven, it should be tracked as a liability.
Open General Ledger, Setup, Main, Account Maintenance
Create a new Main account and enter a description (For example: Loan Payable – PPP)
Select a Long Term Liability, Account Group and Account Type and click Accept
- Open General Ledger, Main, Account Maintenance
- Type in the account number you created in previous step and click Accept
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Set up loan vendor
Set up your PPP lender as a new vendor and select the loan liability account as the default G/L expense account.
- Open Accounts Payable, Main, Vendor Maintenance
- Create a new vendor for your PPP Lender, then on Additional tab select the Loan Payable – PPP as the default G/L Account
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Record deposit of the loan funds
When you receive the loan proceeds, deposit the funds into your new bank account and then record the transaction in Sage 100.
- Open Bank Reconciliation, Main, Checks, Deposits and Adjustment Entry
- Select your PPP Bank Code
- On the Dep/Adj tab enter all applicable transaction information
- Check the box for Select for G/L Posting
- In the Distribution Account No. field, select the Loan Payable – PPP account
- Enter a posting comment and click Accept
Click the B/R Trans Register button to update this transaction to the Bank Rec and General Ledger modules.
Select the applicable Bank Code for PPP Funds Account
Enter a Bank Reconciliation Posting Date
Select the checkbox to Print Full Comments if you entered a comment.
Click Yes at the prompt to update the Bank Reconciliation Register
Click Yes at the prompts to print and then update the Daily Transaction Register.
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Record other loan costs
Although interest and principal payments are deferred for 6 months, interest should be accrued at the stated rate fixed rate of 1% just in case some or all the loan is not forgiven. You may want to ask your lender for a statement showing a schedule of the accrued interest.
Create an Interest Payable account
- Open General Ledger, Setup, Main, Account Maintenance
- Create a new main account and enter a desciption. (For example: Interest Payable – PPP Loan)
- Select a Long Term Liability, Account Group and Account Type and click Accept
Open General Ledger, Main, Account Maintenance
Create journal entry for accrued interest
In this example, for the accrual we took (.01 X 100,000) / 12 months = $83.33 per month
The loan was funded on 04/15/20, so on 4/30/2020 you would owe 15 days of accrued interest. (83.33 / 30) X 15 days = $41.67
Once you receive the accrued interest schedule from your lender you can setup Recurring Journal Entry to record the accrued interest each month.
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Recording loan expenses
It is recommended that you continue to use your regular business checking account to pay expenses just as you usually would. If you have your payroll set up using direct deposit, it is not necessary for you to change the established cash account at your bank. When you pay an allowable expense, make a transfer from your PPP bank account to your regular business checking account using the transfer process established by your bank; for the reimbursement of the allowable expenses. Then, record the transfer in Sage 100.
- Tip: For optimal record keeping and better audit trail, it is recommended that you do a separate transfer for each expense. If that is not an option for you, then try to combine payroll costs in separate transfers from rent & utility (non-payroll costs) transfers.
In Sage 100, you can use Transaction Journal Entry to record the transfer.
First, you will need to format the transaction journal (In examples below, I created a new Source Journal, TR = Bank Transfer). Note: You should only need to format the journal one time.
Format a Transaction Journal
- Open General Ledger, Main, Transaction Journal Entry
- Source Journal = TR and click Next Journal No button
- Click Format and do the following:
- Offset Account No, select the G/L account No used for your PPP bank account
- Offset, Credit
- Transaction Type, Bank Transfer
- Bank Code, select your PPP Bank Code (bank account sending the money)
- Transfer Funds to Bank Code, select the Bank Code for your regular checking account (bank account receiving the money)
Record a Bank Transfer
Here is an example of how you can record a transfer from your PPP bank account to your regular checking account to pay for federal tax deposit for pay date 04/30/2020.
- Open General Ledger, Main, Transaction Journal Entry
- Source Journal, TR and click Next Journal No button
- On Header tab, notice the bank code for your PPP bank account is automatically populated because we formatted the journal. Do the following:
- Enter Posting Date
- Enter a Journal Comment - this field will populate the ‘Posting Remark’ field in the General Ledger and the ‘Comment’ field in Bank Rec for the PPP bank account (account sending the money)
- Tip: For better audit tracking, enter the specifics for this transfer. For example, “PPP transfer for IRS tax deposit PD 4/30/2020 and if applicable you may want to also include A/P Journal No”
- Enter Transfer No – this value will populate the ‘Reference” field in Bank Rec. for the PPP bank account (account sending the money)
On Lines tab, notice the bank code for your regular checking account is automatically populated because we formatted the journal. Enter the following:
Doc Refer - this value will populate the ‘Reference” field in Bank Rec. for the regular checking bank account (the account receiving the money)
Date – enter document date
Amount
Comment – this field will populate the ‘Posting Remark’ field in the General Ledger and the ‘Comment’ field in Bank Rec for the regular checking account (account receiving the money)
Click Printer button to print and review the Transaction Journal
After you have reviewed the journal, click Yes to update the Transaction Journal
In this example, we are paying rent and gas utility bills in Accounts Payable using your regular business checking account:
- Pay your invoices/bills in Accounts Payable as you usually would. Reminder to be sure to use the bank code for your regular business checking account.
- You can use Manual Check and Payment Entry or Check and Electronic Payment Processing to pay for these expenses.
Here is the bank transfer entry from the PPP bank account to your regular check account.
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Reporting and Reconciling
Here is what your G/L cash accounts and Bank Rec would look like after the above examples are posted.
You can track your spending by viewing the applicable accounts on the General Ledger Detail Report.
Tip: When running the GL Detail Report, in the Account Number field, select applicable accounts or you can manually enter each account number separated by a comma to only print those specific accounts.
Notice that all the activity for PPP loan expenditures are shown in the PPP cash account.
The PPP loan balance remains unchanged because no payments have been made. Note: If the loan is forgiven, you can reclassify all or part of the loan balance to Other Income using General Journal Entry. Please discuss the details with your tax account on how you should handle this situation.
The Bank Recap Report and the Bank Reconciliation Report can be used to review and reconcile the account activities.
