Spring of 2020 is a period time we will never forget, especially if you are a business owner or a former commercial banker like me. The daily, hourly, and even minute-by-minute updates over the announcement and subsequent application process of the Paycheck Protection Program left many owners [and bankers] confused and frustrated.
Fast forward to more than a year later and we’ve already had one round of PPP loans forgiven – hooray! If you’ve managed to stay afloat this long you’re feeling pretty good. However, this is where things can get a little tricky. If you recognized the PPP loan as debt in 2020 and it was forgiven in 2021, your accountant correctly recognized the forgiveness (shall we say grant) as Other Income…in 2021. Thus, your bottom line and checking account look great…in 2021.
These “one-time” events will skew your financial performance on paper and inhibit owners or management from obtaining the data needed to make informed business decisions. I recommend chatting with an advisor or accountant to discuss ways to accurately monitor and assess your performance so you can be confident in your decision-making.