The Importance of Accurate Recordkeeping in the Age of COVID-19
Disclaimer: This information was correct at the time of publication; however, new guidance from government agencies may be issued at any time, causing some or all of this information to change. Please visit our COVID-19 Business Strategy Hub for the latest news and ensure you are subscribed here to receive email alerts as they are released. We are working diligently to provide the most current information as it becomes available under our COVID-19 Actionable Insights For Businesses Series.
In the rush to get your PPP loan application in, along with trying to operate through the overall magnitude of the current situation, you might not be thinking about the importance of recordkeeping. But now is not the time to put off good, accurate recordkeeping. Here’s why:
- PPP Loan Forgiveness: Assuming you’re able to obtain a PPP stimulus loan, 8 weeks from the date you receive your loan proceeds, you will need to apply for the forgiveness portion as outlined in the CARES Act. No one has gone through this yet, but you should be prepared to have to justify what you spent the loan proceeds on so that you can obtain the aforementioned forgiveness. We anticipate banks will be told by the SBA that loan forgiveness will be provided on a very rigid basis. Companies that have excellent, authenticatable records will endure this process better than those that do not.
- Federal Government Enforcement: The Federal Government has made it clear that it expects recipients of PPP loans to utilize those loans for the purposes for which they were intended, namely to keep your employees on payroll, as well as cover other specifically noted expenses. We anticipate the Federal Government will not look kindly on companies who misuse and/or abuse the PPP loan program. Maintaining accurate and verifiable records of the expenses you covered with the loan proceeds will be critical in diffusing any potential legal issues that might arise down the road. In addition, this will give lawyers and forensic accountants the data necessary to assist you in remediating potential issues that might arise.
- Potential Future Claims: It’s too early to tell what might happen in the future, but we believe that some companies could ultimately file claims and/or lawsuits against various parties associated with the damage done to their company by the COVID-19 situation. This may come in the form of a claim against your commercial insurance carrier related to your existing policy’s coverage or even future legislation requiring carriers to honor certain COVID-19 related claims. Or this could be in relation to your inability to obtain a PPP loan, and/or your interaction with a lender regarding whether or not they will process your loan. Being able to make a good, defendable claim requires accurate and verifiable information, which you should be collecting now. Emails with lenders, insurance carriers or others should be kept in a separate, special folder. Keep track of phone calls and take good notes, but always try to get things in writing. Keep detailed track of the money you received and what you used it for. Also, look back at the comparable prior year period and start tracking how far off your current operations are to what they were last year or even what your projections were. Letting time pass and waiting to collect valuable data tends to be more expensive and often results in data being lost or missed.
Recordkeeping is never seen as a profit center. Based upon what we see and hear happening today regarding the COVID-19 situation, good recordkeeping may very well make a huge difference in your company’s future and should be made a priority. We suggest designating someone in your organization to be the keeper of this data so that when the time comes, you will know who has it, where it is and can move quickly in addressing information requests.
Chris Tierney, CTP, CFE, is a Partner and the Group Leader for Moore Colson’s Consulting Practice. Chris has over 32 years of experience in providing financial, operational and strategic management, analysis, and advice to domestic and international companies and their stakeholders.
Brian D. Renshaw, CPA, is a Partner at Moore Colson in the firm’s Real Estate Practice and leads the firm's hospitality group. Brian works with registered investment advisors who construct, develop, own, lease, syndicate, advise and manage all classes of real estate assets, including hotels, resorts and restaurants.
