4 Ways Bookkeeping Can Help Your Business in a Recession

4 Ways Bookkeeping Can Help Your Business in a Recession

4 Ways Bookkeeping Can Help Your Business in a Recession

With the economic landscape changing rapidly each day, it can be tempting to push bookkeeping aside for more pressing matters. Who cares about debits and credits when you’re not sure if your small business will survive? But don’t discount up-to-date books just yet—they can be your business’ best bet at securing loans, or making quick financial decisions when it matters most. 

Bookkeeping and the Paycheck Protection Program

If you weren’t able to receive a PPP loan during its first round, you’re in luck. The Paycheck Protection Program is back for round two, and applications are still open. 

There are a few documents you’ll need for your PPP application. If you’re self-employed and haven’t filed your 2019 tax return, you’ll need to produce an annual income statement. And, if you have more than one business, you’ll need to have separate finances. 

Here’s what your lender might need from you to prove your payroll expenses:

  • Payroll processor records
  • Payroll tax filings
  • Payroll tax forms from 2019 (Forms 941, 940 and W-3)
  • Form 1099-MISC records
  • Schedule C for a sole proprietorship

Having your books in order makes the process much simpler, and if you have employees, the easiest way to get the financial information you’ll need is by downloading a payroll report through your payroll provider. 

Further Reading: What is the Paycheck Protection Program? (A Simple Guide)

If you don’t have a reliable bookkeeping solution in place, Bench can help. 

PPP loan forgiveness 

In order to turn your PPP loan into a non-taxable grant, you’ll have to abide by the loan forgiveness guidelines. Not only do you need to spend your loan on certain expenses, but you’ll have to prove those expenses, too. 

The funds from the PPP can be used for the following purposes:

  • Payroll—salary, wage, vacation, parental, family, medical, or sick leave, health benefits (at least 75% of your loan must be used for payroll costs. Payments to independent contractors cannot be included)
  • Mortgage interest—as long as the mortgage was signed before February 15, 2020
  • Rent—as long as the lease agreement was in effect before February 15, 2020
  • Utilities—as long as service began before February 15, 2020

These are the required documents you will need to collect to provide with your PPP forgiveness application. Your lender may have additional requirements.

  • Documents verifying the number of full-time equivalent employees on payroll and their pay rates, for the periods used to verify you met the staffing and pay requirements:
    • Payroll reports from your payroll provider
    • Payroll tax filings (Form 941)
    • Income, payroll, and unemployment insurance filings from your state
    • Documents verifying any retirement and health insurance contributions
  • Documents verifying your eligible interest, rent, and utility payments (canceled checks, payment receipts, account statements)

Increase your chances of PPP loan forgiveness with up-to-date bookkeeping and organized financials. Bench can ensure that your current financials are in order, and walk you through the statements, records, and documents you’ll need to apply for forgiveness.

Further Reading: PPP Loan Forgiveness: The Complete Guide

Maximize your tax deductions 

If you haven’t filed taxes yet and your deadline was April 15, good news: the IRS has officially extended this deadline to July 15, 2020. This extension includes making payments on any taxes owed, so you can defer without penalties and interest. 

This added time gives you the opportunity to carefully comb through your business expenses for the year and maximize tax deductions. If you already have bookkeeping completed for 2019, this process will be a lot easier. 

This article was originally written on May 28, 2020 and updated on June 16, 2022.

Rate This Article

This article currently has 2 ratings with an average of 3.5 stars.

Have at it! We'd love to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and protect yourself. Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers.

Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. Responses have not been reviewed, approved or otherwise endorsed by the credit card, financing and service companies and it is not their responsibility to ensure all posts and/or questions are answered.

Leave a Reply

Your email address will not be published. Required fields are marked *