Long Term Liability (PPP Loan) Showing on Aged Payables Report in Sage

Aged Payables Report in Sage

Many Sage users have intimated to us that they are having an issue with the Aged Payables Report of late. They have informed that the long term liability loans such as PPP loans have been showing on the Aged Payables Report. In this blog, we will explain why this issue occurs, how to resolve it and other associated matters related to  a PPP loan in Sage.

Why do the long term liability loans such as PPP loans show on the Aged Payables Report?

Such loans are usually shown on the Aged Payables Report if you have chosen a Vendor ID while entering data in the Receive Money field.

Read More-: How to Record Loan in Sage 50

How can I avoid the issue of long term liability loans appearing on the Aged Payables Report?

As mentioned above, such loans are usually shown on the Aged Payables Report if you have chosen a Vendor ID while entering data in the Receive Money field.

To avoid this issue, please skip the Vendor ID while entering data and simply type the name of the entity from which you were receiving the money. This will stop the entry from appearing on the Aged Payables Report. However, it will record the liability into the relevant Balance Sheet for the PPP Loan. Whenever the PPP Loan is forgiven, you will need to make a General Journal Entry and debit the liability account for the concerned PPP Loan. You will also need to credit an Income Account, for example, PPP Loan Forgiveness.

Now, we will discuss in detail what a PPP loan is and how to record it properly in Sage.

What is a PPP Loan?

PPP stands for Paycheck Protection Program. It is a loan program incorporated in the CARES Act. It was designed to help businesses maintain salaries and wages and pay utilities and rent during the Covid-19 crisis worldwide. The PPP loan can be forgiven if you can show that you spent the money on the right things.

What can you Use the Proceeds from a PPP Loan for?

You may use the proceeds from a PPP loan on any of the categories mentioned below:

  • Payroll costs and benefits
  • Rent, under lease agreements in force before 15 February, 2020
  • Interest on mortgage obligations, incurred before 15 February 2020
  • Utilities, for which service started before 15 February 2020

Eligibility Criteria to Avail Forgiveness of PPP Loans

To avail of forgiveness, you need to satisfy the following conditions-

Total Time: 30 minutes

A) The 75/25 Rule

🔹 A minimum of 75% of your PPP loan must be used to cover payroll costs. Such costs must not include payments to independent contractors

B) 8 weeks of Coverage

🔹 Only those expenses that are incurred over a period of 8 weeks.
🔹 Starting from the day the first payment was made by your lender are eligible for forgiveness. 🔹 This period will not necessarily start from the date of signing your loan agreement. However, based on your payroll schedule, you may adjust the start of your payroll date to accommodate multiple payroll cycles.

C) Pay Requirements

🔹 It is mandatory for you to maintain a minimum of 75% of the total salary.
🔹 This requirement will be assessed individually for all the employees that did not get more than $100,000 in annualized pay in the year 2019. 
🔹 If the payment received by an employee over the 8 weeks period is less than 75% of the pay he received during his latest quarter of employment, the amount eligible for forgiveness will be reduced.
🔹 The reduction will be equal to the difference between his current pay and 75% of the original payment.

D) Staffing Requirements

You must maintain the number of employees included on your payroll. To check if you have met the prescribed criteria, you may use the calculation given below:
 
First, you should find out the average number of full-time employees you had on your payroll during the period:
🔹 The 8-week period immediately after your initial loan disbursement (A)
🔹 From 15 February 2019 to 30 June 2019, (B)
🔹 From 1st January 2020 to 29 February 2020. (C)
🔹 Now divide A by B. Again, divide A by C. Consider the larger number of these two. However, if you are a seasonal employer, you only need to divide A by B. Now consider the following-
🔹 If you obtain a number equal to or more than 1, it shows you have maintained your headcount successfully and hence satisfied this requirement.
🔹 In case you obtain a number less than 1, it shows you have not maintained your headcount successfully and your forgivable expenses will get reduced proportionately.

E) Rehiring Grace Period

You can again hire any staff that was laid off earlier. Alternatively, you can put him on furlough and reinstate any pay that was reduced by over 25%, in order to satisfy the requirements for forgiveness. You need to do this on or before June 30th.

What are Considered Payroll Costs?

The following are considered payroll costs and are eligible for forgiving PPP loans

  • State and local taxes assessed on compensation
  • Salary, tips, wages or commissions (up to a maximum of $100,000 on an annualized basis for every employee)
  • If you are an independent contractor or a sole proprietor- income, wages, commissions or net earnings arising from self-employment (up to a maximum of $100,000 on an annualized basis for every employee)
  • Employee benefits including costs for parental, medical, family, or sick leave, vacation, severance pay; payments needed to cover group health care benefits such as insurance premiums and payment of retirement benefits

In this blog, we tried to share all the information you need related to PPP loans showing on your aged payables report. We have also discussed other associated matters related to PPP loans. We hope, after going through the blog, you will find it easier to manage PPP loans on your own. If you are still not clear about the process, or, if you experience any difficulties in any matter related to PPP loans, we would recommend you to get in touch with some experienced Sage professionals.

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💠FAQs💠

What happens if my PPP Loan is not Forgiven?

The following scenarios may arise- 
🔹 Your lender may ask you to submit additional documentation so they are able to reevaluate your request.
🔹 Your outstanding balance will start accruing interest at 1%, for the remaining part of the 2 year period.
🔹 There is no penalty for prepayment. You can pay off the outstanding balance any time you want, with no additional charge.

How can I Record a PPP Loan in Sage 50 and Track it through the Aged Payables Report?

Here, you will need to record the loan as a purchase invoice. Two steps are involved in this-

Step I: Establish the Balance
🔹 Create a new general ledger account, preferably, a Long Term Liability account 
🔹 Click on Tasks
🔹 Go to the Receive Money section
🔹 From the drop down box, change Customer ID to Vendor ID 
🔹 Specify the Vendor or bank from which you will receive the loan 
🔹 Specify the Cash account into which you received the money 
🔹 Click on the Apply to Vendor Account tab 
🔹 Select the liability account you have created 
🔹 Enter the loan amount 
🔹 Click Save
🔹 Sage will create an equivalent of an invoice for the vendor record. The same can be paid each month by clicking on the payments window

Step II: Paying the Loan
🔹 Go to Tasks
🔹 Click on Payments
🔹 Specify the Vendor (bank)
🔹 Choose the invoice to pay 
🔹 Change the amount paid to that you are paying in principle.
🔹 Click on the Apply to Expenses tab
🔹 Next, enter your interest expense account and also the interest amount you are paying 
🔹 Check if the check amount is correct
🔹 Finally, click on Print or Save.

How can I Record a PPP loan in Sage 50 as a General Entry?

Two steps are involved in this-

Step I: Establish the Balance
🔹 Create a new general ledger account, preferably, a Long Term Liability account 
🔹 Create a General Journal Entry by debiting the cash account and crediting the liability account created just now
 
Step II: Paying the Loan
🔹 Create a Vendor in the Expense Account field for the lender concerning the liability account created in Step 1
🔹 Go to Tasks
🔹 Click on Payments
🔹 Specify the Vendor (bank)
🔹 Click on the Apply to Expenses tab
🔹 On the first line, type in the liability account created in the previous step
🔹 Enter the amount you are paying in principle.
🔹 On the second line, specify your interest expense account and the interest amount you are paying 
🔹 Check if the check amount is correct
🔹 Finally, click on Print or Save.

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