The Accounting Podcast

Before it could even get started, round two of the Paycheck Protection Program (PPP) ran into problems with the SBA website failing to handle the deluge of applications from banks both big and small. The blame game intensifies, with private schools joining public companies on Sec. Mnuchin's naughty list. Meanwhile, the Justice Department is launching an investigation of possible PPP application fraud, and the IRS decided that PPP loan-related expenses will NOT qualify for tax deductions. Finally, the AICPA urges PPP loan forgiveness guidance and makes recommendations, and we've got a survey of small businesses showing how the PPP is working out for them.

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[00:01:13] 

PPP, how can I explain it? 
I hope you will obtain it. 
If you listen, I will show you how to claim it. 
It's a program that they made for a virus called Corona. 
They give you free money 'cause you gotta stay at homa. 
The first P's for Paycheck. 
You may think you know what that is. 
Boss gives you moolah, shekels, lettuce, scratch, or cabbage. 
That part is true, but what if you are self-employed? 
Profit counts as payroll, so your biz don’t get destroyed. 
The other P’s Protection, as in fiscal preservation. 
You can’t pay no taxes if you’re in liquidation. 
They’re thinkin’ two months, so remember 2.5, so when the curve flattens, we’re all gonna thrive.  
There’s one more P that we gotta talk about. 
If you don’t get with the Program, son, you’re gonna be without. 
All the savvy players have friends at the bank to put them first in line, when the program starts to crank.
Grab your accountant and do your calculation to get the figures right for your loan application.   
If you use the proceeds for paying your team, your loan will be forgiven, and you’re gonna scream: "Get down with PPP! Get down with PPP. Get down with PPP. Get down with PPP. Get down with PPP ..."
 
David Leary: [00:01:23] It's amazing.
 
Blake Oliver: [00:01:25] Get down with PPP. Yeah, isn't it? [crosstalk] 
 
David Leary: [00:01:25] He captured the whole history of everything. The whole month, he just captured in one rap song.
 
Blake Oliver: [00:01:34] I love that so much. That was Steven Zelin. He's a CPA. He uploaded this video to his YouTube channel. That was just a part of it, go watch the whole thing. He's got almost 6,000 views in four days. We're recording on May 1, but we're gonna be talking about the month of PPP. I was looking at our past episodes, and three titles are all PPP, and this one's gonna be it, too, because it just keeps on going.
 
David Leary: [00:02:00] Should we do our introduction?
 
Blake Oliver: [00:02:03] Oh, yeah,  yeah. 
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This episode of The Cloud Accounting Podcast is sponsored by BQE Core. As firms everywhere are positioning themselves to work remotely, BQE Software is committed to supporting you and your employees during this critical time. BQE's Core products operate 100 percent on a native cloud platform that's uniquely able to help you in your efforts to embrace remote work while maintaining your productivity.

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Blake Oliver: [00:03:59] Welcome to The Cloud Accounting Podcast. I'm Blake Oliver.
 
David Leary: [00:04:03] And I'm David Leary. Blake, we have something to celebrate before you jump into PPP.
 
Blake Oliver: [00:04:08] Okay, let's do it.
 
David Leary: [00:04:09] We hit 200,000 downloads.
 
Blake Oliver: [00:04:11] Awesome!
 
David Leary: [00:04:13] So, thank you, listeners. Thank all of you for the support the last- we're almost two years, right? Getting very close? 
 
Blake Oliver: [00:04:19] Yeah. Yeah.
 
David Leary: [00:04:22] It's been an amazing run. 200,000 downloads is not anything to a squint about, right [crosstalk] 
 
Blake Oliver: [00:04:27] I thought you were gonna say $200,000, and we definitely haven't made that much money.
 
David Leary: [00:04:33] No, no, no, it's not that. It's just downloads.
 
Blake Oliver: [00:04:35] It's just downloads. 
 
David Leary: [00:04:35] In this day and age, you might be able to use those to buy things. I don't know.
 
Blake Oliver: [00:04:39] Yeah. I know we have some reviews that we need to get to because we have ... We had a bug, and we weren't getting the reviews.
 
David Leary: [00:04:45] Yes. So, we've had two reviews.
 
Blake Oliver: [00:04:52] This is from Dwight Dettloff. He says - five stars - "Love this podcast. There's a few that I listen to regularly and this is one of them. As a solo practitioner, it's like having lunch or happy hour with other colleagues." Well, cheers to you, Dwight.
 
David Leary: [00:05:08] This one is also on Podchaser. It's five stars. It's from Lizgolightly. "Love hearing from you guys in Australia.  We have fast changing government deadlines here to and legislation which was introduced so fast, there was no consultation and included some and excluded others.  Thanks for the updates look forward to hearing more. Take care at this difficult time."
 
Blake Oliver: [00:05:28] So, it sounds like government is the same everywhere.
 
David Leary: [00:05:31] Yes, I've been watching on the sideline of what's happening - a little bit in Canada, a little bit in the UK, and Australia. Their programs are causing just as much stress and pain for accountants as the PPP program is, here in The States. It's good to hear we're all in the same boat, worldwide.
 
Blake Oliver: [00:05:49] Well, let's get straight into it, because there was a ton of news, a ton of drama when it comes to the PPP. There's a lot of blame going around now that people are starting to get really, really frustrated. Where do we even start with this? Well, where did we leave off last week? When we were recording, the program was set to open up again on Monday. 
 
David Leary: [00:06:10] At 7:30 Pacific, yeah. So, it was about 10:30 a.m., Eastern.
 
Blake Oliver: [00:06:15] We predicted the crash, which then followed.
 
David Leary: [00:06:18] We predicted the crash, when we recorded on Saturday, and then, Monday, it crashed, I think, within 30 seconds.
 
Blake Oliver: [00:06:24] Yeah, no surprise there. Just too many applications trying to come in all at once, and the SBA's computer systems are terribly antiquated. Some bankers were online, live tweeting, throughout the night, their frustrations with trying to enter a single piece of information and then getting kicked out and having to go back in and information getting lost and having to reenter it. It just went on and on and on. I think it's still a problem, I don't even know if it has been fixed at this point. I think people are just not even really talking about it anymore, but it's just still going on. They had to- 
 
David Leary: [00:06:54] That's because they keep giving us gifts to talk about, but we'll talk about that more ... Apparently, that first day, though, they had 100,000 loans submitted in one day, the very first day.
 
Blake Oliver: [00:07:06] Yeah, but we're talking, there's gonna be another 1 to 2 million loans; actually, way more than that, because it should be smaller dollar numbers.
 
David Leary: [00:07:13] Yep. 
 
Blake Oliver: [00:07:13] So, 100,000 loans, when you're probably gonna have, what, 3 million of them? It's not that good. It's gonna take a whole month to get through. So, what they tried doing is rate-limiting, so banks could only submit so many loans per hour, or per day, or whatever. That didn't work, and people were really frustrated. Some of the smaller banks were really frustrated that the big banks were allowed to submit loans in batch files. Originally, it was 15,000. So, if you had 15,000 loans to submit, you could just dump them all into an XML file and submit that all at once, and you didn't have to go through this horrific process of entering them one by one. Then, when the banks protested, the Treasury, or SBA lowered that to 5,000. That still made a lot of small banks have to sit there just manually entering loan applications because they're only doing a few hundred. 
 
David Leary: [00:08:03] You have to manually enter. Did you see the article in the Journal of Accountancy from Jeff Drew?
 
Blake Oliver: [00:08:08] No, no.
 
David Leary: [00:08:08] So, they banned the use of RPA programs. If you were smart, and you had a keyboard-automation tool that would fill out the online application for you, which you would do if you were smart, once you typed things in ... They banned the use of those. They basically said you have to manually type the data into the website. 
 
Blake Oliver: [00:08:28] Unless you're a bigger bank, in which case you can just submit XML files. Then, in order to, I guess, address some of that, they temporarily, for a day, stopped the big banks from being able to submit and only the small banks could do it. But then that isn't exactly fair, because a lot of the people who are at big banks, the small businesses who got neglected by the big banks, Chase, and Wells Fargo, and Citi, and Bank of America, they're like, "My loan still hasn't been processed, and you're giving preference now to small banks?" Where that was clearly a success story for the first round. None of it makes any sense. 
 
[00:09:03] I think the signal that maybe Treasury is starting to figure out that this is not going so smoothly is that Treasury Secretary Mnuchin deployed his top deputy to the SBA to fix this thing. I'm sitting here thinking to myself, "This is 27 days after this program started, and anyone who was paying attention could see this was gonna be an issue." He sent Deputy Secretary Justin Muzinich. So, we have Mnuchin sending Muzinich to the SBA to sort this thing out. So, we'll see. Hopefully, he can get things moving.
 
David Leary: [00:09:37] Well, he's also announced, I saw earlier this week, about they're gonna investigate now, or audit anybody that's done $2 million or more.
 
Blake Oliver: [00:09:46] Well, yeah. Now, we're getting into the blame game. Small business owners are really frustrated; accountants are really frustrated, but mostly those small business owners who don't have accountants, who aren't even fortunate to have accountants advocating for them, they're really mad. So, who are they gonna blame? Two weeks ago, we were blaming who? We were blaming the big banks, the big or small businesses who got these loans, like Shake Shack and was it Ruth Chris.
 
[00:10:13] Now, Mnuchin tweeted today, "It has come to our attention that some private schools with significant endowments have taken PPP loans. They should return them." He even went on TV and called for these big businesses, the public companies who have taken PPP loans, to not just return the money, but also apologize for even taking the money in the first place. This comes after the revised guidance. Was that even last week? Did we talk about that last week, the revised guidance-  
 
David Leary: [00:10:41] No. The Revised guidance, as far as ...? 
 
Blake Oliver: [00:10:44] The loans; like what qualifies as needing the loan?
 
David Leary: [00:10:48] Oh, yeah, they revised that.
 
Blake Oliver: [00:10:49] Yeah.
 
David Leary: [00:10:49] We didn't talk about that last week. I think that was new this week.
 
Blake Oliver: [00:10:53] Oh, God, that was this week? 
 
David Leary: [00:10:54] So, this week, we had the revised guidance.
 
Blake Oliver: [00:10:56] Right. So, everybody's getting upset. They're all getting mad because these big businesses, these public companies are getting these loans. So, then, Treasury comes out with the FAQ, and revises the guidance, and says, "Well, even though we excluded the requirement that you don't have access to outside capital, we actually meant that we wanted you to consider that." Because normally, with SBA loans, you can't get them if you have access to other capital; if you have a way to raise money outside of the SBA. But they exempted all the businesses from that, specifically. They did that on purpose in the legislation to speed things up, but now that they're seeing, "Oh, these big businesses, businesses that may not need it, are getting the money. Let's go back and change the rules."
 
David Leary: [00:11:38] Well, that's been a lot of the big problem with this, is the guidance keeps coming out after the fact, after the fact, after the fact.
 
Blake Oliver: [00:11:46] Yes. 
 
David Leary: [00:11:46] But I think he also, yesterday, or maybe it was this morning, he said that they're going to now not just audit and look at loans that are above $2 million, they're gonna start looking at every single loan. You're gonna have to prove that you had some economic need.
 
Blake Oliver: [00:12:00] Yeah. I got an email from my old firm, from Armanino, and they talked about this, and I couldn't believe it. But now that you're confirming that, I guess it must be true. So, basically, the Treasury is saying they're gonna audit ... Well, they said on April 28, they're gonna audit all loans over $2 million to see if the certification was correct; if they actually certified properly to this need or this necessity, I suppose. As we've talked about in the past, the certification is super-super-broad. All you have to say is that current economic uncertainty makes the loan necessary to support ongoing operations. That could be anybody, right? 
 
David Leary: [00:12:40] Yeah.
 
Blake Oliver: [00:12:40] So, then, Treasury Secretary Mnuchin says they're gonna audit all loans greater than $2 million for compliance with the eligibility and calculation rules and the forgiveness and whatnot. Then, the next day - that was April 29 - apparently, there's reports that he has now extended the audit threat to all borrowers, regardless of the loan amount. So, all these accounting firms are now emailing their clients, "Better make sure that you are comfortable with what you did and what we helped you do because they might audit you." To incentivize people to give back the money, the SBA is offering a limited safe harbor window. So, if you return the money by May 17 to the bank, then there will not be any ramifications. What could that be? That could be criminal penalties. I don't know about you, David, but this just seems insane to me. They gave out all this money with hardly any strings attached, and now, after the fact, they're saying, "Give it back or else ..."?
 
David Leary: [00:13:40] This all started, what was it, April 3, right, was the beginning of this- 
 
Blake Oliver: [00:13:43] Yes. Yes. 
 
David Leary: [00:13:44] -when it got flipped on? So, basically, the entire month of April. Then, the cherry on top, though, was late yesterday ... Did you see the guidance announced late yesterday [crosstalk] 
 
Blake Oliver: [00:13:54] The IRS guidance? 
 
David Leary: [00:13:56] The IRS guidance [crosstalk] that any money you spend the PPP loan on, you can't expense it for your taxes. 
 
Blake Oliver: [00:14:03] Right, it's not deductible.
 
David Leary: [00:14:04] Not deductible.
 
Blake Oliver: [00:14:06] I actually have never seen our community get so furious. This is the thing that actually set everyone off.
 
David Leary: [00:14:15] The whole month ... It couldn't have got ... This just was the top of the cherry. It's unbelievable how insane this month has been and the ridiculousness. Then they just topped it off with that. Last night, you could see all the Slack channels are in ... People just quit working yesterday. They just shut their laptops, they shut their computers. They just walked away and poured drinks. It was an unbelievable month and for them to top it off with that ruling last night is just amazing.
 
Blake Oliver: [00:14:41] Now, I know I haven't been following all the tax implications of all this stuff, but my understanding is that the loan forgiveness that is going to happen is supposed to be tax-free, and it is going to be tax-free. They're not gonna tax us. Because normally when you get a loan forgiven, it's income; it's taxable, right? So, this income is not going to be taxable, but then the IRS comes out and says, "Oh, but the deductions, or the expenses associated with this income is not deductible," which is basically the same thing. If they had just made the loan forgiveness taxable, and the expenses deductible, it's the same thing. It ends up making the money taxable.
 
David Leary: [00:15:28] Yeah, and when it's all said and done, your loan that you got is probably really- you have to, in your brain, almost think it's really a loan for 75 percent of that, when it's all said and done. So, if you got a $100,000 loan, you really, probably got a $75,000 loan for free, because you're paying taxes on the rest. 
 
Blake Oliver: [00:15:45] Yeah, but you can't use the loan to pay your taxes.
 
David Leary: [00:15:47] No ... From the IRS's standpoint, this stimulus is just ... They really didn't give out a trillion dollars; they only gave out $750 billion.
 
Blake Oliver: [00:15:58] Yeah. It's just- it's a very backhanded way to reduce the amount of ... It's gonna create a lot of horrible conversations that now accountants have to have with their clients because we told them, "Oh, the money is tax-free," and now we have to tell them actually it isn't. 
 
David Leary: [00:16:16] And you have to also tell them it may not get forgiven now, either. Remember, two weeks ago, I said, watch. They keep using this word "potentially forgivable." Now, every week, every day, they chip away at that forgiveness. Two weeks from now, is it gonna be, "Sorry, you can't forgive any of the loan anymore. We changed our mind ..."? 
 
Blake Oliver: [00:16:32] Yeah.
 
David Leary: [00:16:34] Is it starting- it feels like this. It really feels like this. 
 
Blake Oliver: [00:16:36] Just to put things in perspective, I don't think they can do that legally. I don't even think that this guidance that they've issued would stand if this went to court. You can't just go back and change the terms after the fact. So, if a company took the money, and certified, and is willing to stand up to that, there's no case. The Treasury, and the SBA don't have a case. But the problem it does create is the PR problem. Secretary Mnuchin going after individual businesses, that's terrible. That could destroy your business if the public turns against you. Rubio even tweeted about how they're gonna release the full list of PPP recipients. Did you see that?
 
David Leary: [00:17:19] I did not see the tweet, but I think they should release who's been taking these loans. It's public information. It's public money. We should see this. I can agree [crosstalk] I think it's gonna be done; very politically driven, right? I can see-
 
Blake Oliver: [00:17:32] Right. First of all, that would be a terrible idea because it would ... Talk about a witch hunt. Then, it would also create problems for a lot of people who are, I think, supporters of the administration. So, then it provides fuel on both sides of the political debate. There's plenty of folks who donate to the Trump campaign who got this money. We've already seen evidence of that in The New York Times. There was a story here about a conservative Texas hotel owner, who owns a ton of hospitality businesses. He used the loophole in the law - which is that each location just has to have fewer than 500 employees - to get a ton of money. It's crazy. $126 million.
 
[00:18:23] So, this is Monty Bennett. He applied through a network of entities for $126 million in forgivable loans from the Paycheck Protection Program. According to company filings, he's received $70 million of that, as of May 1. For comparison, Ruth Chris Steakhouse, which is the second-largest recipient, got just one-sixth that much and returned the money. Monty Bennett is saying he's not gonna give the money back, and he's saying he's likely not going to use the money in the eight-week period for payroll. He's gonna hold onto it, and keep it as a non-forgivable one-percent working-capital loan, which you and I have talked about as being a strategy that many small business owners will likely take. The money isn't going to go to payroll. It's gonna go to helping them open up again when the economy improves.
 
David Leary: [00:19:14] That's if you do get the money, right? That's your worst-case scenario is you have a loan for one percent, which is pretty good- 
 
Blake Oliver: [00:19:19] Yeah, you can pay it back in two years, and you don't have to pay for six months. So, you could hunker down for six months, and then start up again, and use that money to help you start up again, which makes total sense as a business owner. 
 
David Leary: [00:19:31] Well, maybe there's a hidden gem in this, right? I know we were upset; I was upset ... The fact that these big, huge companies are taking this money because, ultimately, their one loan could help 2,000 small businesses, in a way. Now that this ruling came out with the tax deduction, if it's not deductible, essentially ... You're saying somebody'd have to fight this; fight it, right? 
 
Blake Oliver: [00:19:55] Right.
 
David Leary: [00:19:56] And go to court over this. Well, maybe we need some of these huge companies that have lawyers and have taken massive amounts of money to fight that.
 
Blake Oliver: [00:20:05] Yeah. 
 
David Leary: [00:20:05] The average small business owner's probably not gonna be able to fight this, on the whole.
 
Blake Oliver: [00:20:08] Maybe somebody will, but I don't think they're gonna go after Monty Bennett because he's a big donor. He's a conservative donor and has donated like $150,000 to the Trump campaign. So, I think this puts Mnuchin in kind of an awkward position because here's the number-one example of somebody who benefited from this program who should not have, according to the intent of the rules. Apparently, he was lobbying in Washington for these exemptions.
 
[00:20:36] This makes like total sense. Business owners who are kind of on the big side of small hear about all this money that's gonna come out; these billions and billions of dollars, and they wanna get a piece of it, and they have interests in Washington. So, they're working behind the scenes to change the legislation - this is lobbying, right? This is how it always works - to make sure they qualify. They got this exemption put in place. I'm not saying it was this guy in particular, but it was probably bunch of them all lobbying for exemptions together. While this law is being drafted, they get that put in there so that they can qualify, even though, in aggregate, they have more than 500 employees, they can still get the money.
 
[00:21:11] I think this was a political miscalculation by whoever was drafting the law. They figured, okay, well, some big businesses are gonna get the money, but there's gonna be so much of it, and everybody's gonna get money; nobody'll care. Then, we had the computer problems, and the slow roll-out of the program, and the money not getting out. Then, people are getting really, really mad, and they have to blame somebody. So who do you blame? Treasury is not gonna blame itself. Who do people love to get mad at? They love to get mad at big banks, and they love to get mad at big businesses, so that's who's become the target of all of these attacks.
 
[00:21:47] Honestly, if you're out there attacking them, which, there's a lot of people doing that ... Gene Marks, he's the number one influencer CPA; he's all over the news; probably the most visible CPA in the world. He's writing all these articles. I'll read the headlines for two of them. "Shake Shack handed back its $10m loan. But that's no reason to applaud," going after basically Shake Shack for even taking the money in the first place. Then he wrote another article, "America's big banks should be ashamed of themselves." Just going after the big banks. I know it's fun to do that- 
 
David Leary: [00:22:24] We've taken part in some of this, right? 
 
Blake Oliver: [00:22:25] Yeah. 
 
David Leary: [00:22:27] I get that, but I'm less mad at the people who got money as much is the over-celebration by the Treasury, and the SBA about how great this program is, even though there's just flaws everywhere. Just stop trying to celebrate this as a victory. It's not a victory. It's just not.
 
Blake Oliver: [00:22:45] Yeah. I guess what I'm trying to say is that all of this blame game on the businesses that took the money and the banks, it's all just a distraction. It's a distraction from the real problem with the program, which we have talked about since the very beginning of all of this. It's the way it was structured in the first place, and the way it was rolled out through the SBA and the banks, who just don't have the computer systems in place, the technology, to deal with this kind of volume. Nobody's talking about that. You don't have people like writing articles. That's what I would love to see - a guy like Gene Marks, with his platform, exposed the real problem here.
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This episode of The Cloud Accounting Podcast is sponsored by Justworks. Justworks is a combination of simple software and expert support for payroll, benefits, HR, and compliance, all in one place. This combination makes it easier for accountants, bookkeepers, and outsourced CFOs to help their clients run their businesses more smoothly and access great benefits for their employees. With Justworks, your clients get access to affordable benefits, automated payroll, HR tools, and compliance support for ever-changing employment regulations.

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David Leary: [00:24:46] Speaking of platforms, there's news that just broke after we started recording. So, I'm gonna jump on this article right now, which is really [crosstalk] I'm gonna rewind to news from about two hours ago, first. Obviously, with this program, there's constant confusion. Now, the latest confusion I don't know if you've seen is when do we start counting our eight weeks? Do we start counting it on the day of our next payroll? Do we start counting it when we get the money? Do we start counting when our city or town has lifted the stay-at-home orders? When do we start the eight-week count?
 
[00:25:17] The AICPA came out with their guidance, which they say [inaudible] with the beginning of the pay period, not the date of the loan proceeds are received. They also say it should not even start- it should be flexible to when the business chooses to open again. Finally, because I felt like the AICPA has been a little not swinging their sword; they've been a little soft with a lot of recommendations. Now, they're changing to urging. They're not recommending things anymore. Well, 33 minutes ago, after we pressed the record button, the AICPA has taken a position on the tax deduction.
 
Blake Oliver: [00:25:52] Oh, what are they saying?
 
David Leary: [00:25:53] I'm gonna read the quote here. "The AICPA believes strongly that the IRS's interpretation denying deductions of expenses forgiven under the PPP program is contrary to Congress's intent." This is a Chris Hessey, CPA chair of the AICPA Tax Executive Committee.
 
Blake Oliver: [00:26:09] Yes, good! Take a stand because that is just ... What has happened here is ridiculous. 
 
David Leary: [00:26:15] The AICPA plans to seek legislative clarification. So, cheers to the AICPA, who I really have felt they've been too soft along this whole path on this ... I think last night, it hit- it finally hit the peak for everybody, and even the AICPA, it finally hit. They're like, "This is complete shit. We have to do something now." 
 
Blake Oliver: [00:26:38] When it becomes an actual tax issue, that's when CPAs get really mad, right? Oh, man.
 
David Leary: [00:26:44] With that said, I got approved for my PPP loan. 
 
Blake Oliver: [00:26:48] Hey, congratulations, David.
 
David Leary: [00:26:50] I filled out the website with a small local lender, what, April 4? That was a Saturday. Heard nothing the whole first round. Nothing. Then the day before the second round basically got turned on, I heard back. I filled stuff out. Didn't hear anything. Then, yesterday ... Because they made that window, and they turned it off for all the big banks, I got approved like that. Then, I've talked to some another accountant this morning, and she said, yeah, everybody that she knows, the small ones, it's finally going through. So, things are starting to go through. But it was funny, even last night before I got the email, I was just like ... I kinda just wanna stop even worrying about it now, and then it went through as soon as I was about ready to be done with it.
 
Blake Oliver: [00:27:31] You've been waiting almost a whole month. You applied as soon as it started.
 
David Leary: [00:27:35] Yeah, it was the first- it was one of the few websites I found that was working [crosstalk] that I could apply.
 
Blake Oliver: [00:27:40] Wow. I wonder how much money has actually gotten out to small businesses. We were really all over that, at the beginning, but then, I kind of gave up because SBA doesn't track it, and they aren't releasing information on it. So, we still- we have anecdotal evidence that money is getting out finally, but we still don't know just how much has been approved versus how much has been disbursed. There is no data [crosstalk] on that, a month after the program started. 
 
David Leary: [00:28:05] Payments.com did have a survey of 1,200 small businesses. They're looking at about how many SMB owners have applied for PPP loans and the different stages. 35 percent have been approved but have yet to receive the funds. 'My application's been filed but has not been approved' is 31 percent. 'I've applied, and I received funds' is about 30 percent. Then, 2.5 percent or almost three percent were 'Application was denied.' So about, at best, a third of the money has been put into somebody's bank account.
 
Blake Oliver: [00:28:40] Oh, wow, that's worse than I thought it would be. I was hoping it would be at least half. So, a month later, a third of the money is in the accounts, and we're probably gonna need more. I think you talked about an estimate, on the last episode, that we're gonna need $900 billion to actually fund all these applications.
 
David Leary: [00:28:58] Yeah. Somebody from Bank of America was talking about that. 
 
Blake Oliver: [00:29:00] So, here's the question I have. I've been thinking about this, David, when it comes to the PPP money actually not just getting to businesses, but actually helping people stay on payroll. I want to kind of give you a hypothetical situation. Pretend I'm a business owner and I don't really care. I'm gonna act in my own self-interest, right? Let's take that as an example. So, I get this PPP money. Let's say I get $100,000, and I'm gonna use 75 percent of that on payroll.
 
[00:29:25] Now I have a choice. I was gonna lay off maybe 10-20 percent of my workforce because my revenue's down 10-20 percent. I could keep them, and I could pay them using that money, or I could do what I was gonna do before and lay them off. Let's say I lay them off, even though I got the money. What that means is that ... Now, let's say I lay off 20 percent of my workforce, so $80,000 can get forgiven still, though, because I'm still paying 80 percent of my employees, and 80 percent the payroll.
 
[00:29:55] Then, in that case, the other 20 percent, the $20,000 just turns into a loan at one percent, and I can just pay that money back. So, in that case, did the program actually do anything? There's no disincentive to not lay people off, I guess. You can always just take the money as a small loan. Does this makes sense?
 
David Leary: [00:30:15] Yeah, and I think the same thing- the surveys from PYMNTS addressed some of that, too. Some people were just taking it as a cash cushion, like 25 percent, just in case.
 
Blake Oliver: [00:30:25] Oh, really?
 
David Leary: [00:30:25] Yeah.
 
Blake Oliver: [00:30:26] I gotta look at this survey. Wow.
 
David Leary: [00:30:28] Generally, 25-30 percent said if they don't get it, they won't survive at all. About half, close to 40 to 50 percent are in that range area, are pushing, like if they don't have it, they wouldn't be able to keep their employees until they're ready to reopen. So, I think it is helping some small businesses keep employees until they're able to reopen for X=eight weeks, but we're already five weeks in, six weeks in. By the time people get this, it's just so late, and it just took so long.
 
Blake Oliver: [00:31:03] Well, and as a reminder, the name of the program is Paycheck Protection Program. That's what it's supposed to be doing. So, is it actually doing that is my question.
 
David Leary: [00:31:13] Some part of this, I've been feeling, is that Congress is out of touch. The fact that they think restaurants have 500 employees; they write these things in. Some part of me questions do they even care about small business? I'm gonna reinforce this. You're aware of the Main Street Lending Program, right?
 
Blake Oliver: [00:31:30] Yes. That's the next one for the larger businesses.
 
David Leary: [00:31:34] Yes, but where do you normally ... When people talk about Main Street USA, what size businesses are you usually talking about on Main Street USA?
 
Blake Oliver: [00:31:41] Well, normally, I'm thinking about like the mom-and-pop retail stores, like the hardware store, or something.
 
David Leary: [00:31:46] Small businesses.
 
Blake Oliver: [00:31:48] Yeah. 
 
David Leary: [00:31:48] So, they create a program for businesses that have up to 10,000 employees. This is the 500 to 10,000 employee bracket of businesses that have revenues up to $2.5 billion in sales, and they call it the Main Street Lending Program. How out of touch are they? This should be called Almost Fortune 500 Lending Program. 
 
Blake Oliver: [00:32:05] It should be called the Big Box Lending Program. Then, they should've called the Paycheck Protection Program the Main Street Lending Program.
 
David Leary: [00:32:14] They're just completely out of touch with what's out there in the world. It's so shocking to me. It's not just Republicans. It's also Democrats. 
 
Blake Oliver: [00:32:24] Oh, yeah. Let's not forget, like, we've gotten some criticism lately for being skewed politically, which I think is funny because I would not consider myself to be a liberal, in the slightest. I just hate waste. I hate inefficiency. I hate programs that don't work. The Democrats bear just as much of the blame for this legislation as the Republicans, given that it passed unanimously. All it would have taken is one person to stand up and say, "Hey, guys, maybe this isn't such a good idea," and nobody did. So, I think there's equal blame to go around. Both the Democrats, and the administration, and the Republicans in Congress and the Senate. Actually, you know who I feel the worst for in all this is the poor people that are working at the SBA. I mean, it must suck to work there right now. Can you imagine?
 
David Leary: [00:33:12] Or even people that are processing bank loans and manually typing these into the SBA website [crosstalk] 
 
Blake Oliver: [00:33:16] Oh, my God. 
 
David Leary: [00:33:19] Obviously, we've talked about accountants and bookkeepers that are suffering across the board. Then, the IRS, as well, right? People at the Treasury ... This is definitely being politicized at the highest levels, and it's gonna continue to be. There's no end in sight to this.
 
Blake Oliver: [00:33:37] Yeah, and that's the problem is that ... If we could just avoid politicizing it and just deal with the actual fundamental issue, which is that they wrote the law wrong, then we could get around this better, but the fact that nobody wants to own up to it and just wants to point fingers at other people, that's the big problem here.
 
David Leary: [00:33:55] It just keeps going. One thing that drives me nuts about this is it's bad enough we have this virus that there's no end in sight. Everybody has to just ... They have this unknown in their life. But then, the stimulus package, to some extent, it's created just as much unknown. It's actually worse because it gave everybody a bunch of hope, like, hey, there's gonna be these loans, and they're gonna be tax-free, and you're gonna be able to ... We're gonna get them out within 10 days, et cetera, et cetera, et cetera. 
 
[00:34:23] Then, even people's stimulus checks ... Last week, we talked about half the people still have not received their stimulus money. So, people just have all these non-predictable things happening in their life. You'd think, if anything, the financial part could be stabilized by just being consistent and being smart in how we do this, but it's not. There's no end in sight to this. We'll have a cure for COVID before this gets figured out.
 
Blake Oliver: [00:34:48] It's possible. It is unlikely, but possible. Oh, man ... 
 
David Leary: [00:34:53] Any other PPP news?
 
Blake Oliver: [00:34:55] No, and honestly, I have no energy to talk about anything else [crosstalk] today. 
 
David Leary: [00:35:00] -Windows update making QuickBooks Desktop crash.
 
Blake Oliver: [00:35:04] Well, why the hell are people still on QuickBooks Desktop?
 
David Leary: [00:35:07] I knew that was gonna be your response, so I didn't really talk about that one. 
 
Blake Oliver: [00:35:09] Just do it.
 
David Leary: [00:35:10] There's an air show in Phoenix, so we've gotta get off because we're not gonna be able to record anymore.
 
Blake Oliver: [00:35:15] There are some jets that are gonna be flying over the city in about 20 minutes. My five-year-old son really is gonna enjoy watching that, so I gotta do that. But also, yeah, it's gonna be incredibly loud. 
 
David Leary: [00:35:27] Are they gonna be throwing out billions of dollars of stimulus money out the window of the jets, so that way ...? 
 
Blake Oliver: [00:35:30] That would be really cool- 
 
David Leary: [00:35:32] The efficient way to distribute it. 
 
Blake Oliver: [00:35:33] No, it's in support of our first responders. They're not gonna be throwing out money. They're gonna be throwing out hope. So, I'm gonna go watch that and have a nice rest of my Friday. I hope you do, too, David.
 
David Leary: [00:35:47] Yeah, so if people want to get a hold of you, what's the best way?
 
Blake Oliver: [00:35:50] I am @BlakeTOliver on Twitter. How about you, David?
 
David Leary: [00:35:54] I'm @DavidLeary. You can also follow The Cloud Accounting Podcast on Twitter. @CloudAcctPod, or just search for Cloud Accounting Podcast. I did create a survey - Was this the worst April in the history of accounting? So, I'd love if you went to that survey and said yes or no.
 
Blake Oliver: [00:36:10] Hey, I realized I forgot to read some listener mail before we stopped recording last week. So, I want to get this on the record. Is that all right? 
 
David Leary: [00:36:17] That's a good way to close this out. Perfect.
 
Blake Oliver: [00:36:19] All right. This is from Greg Bayramian; subject - value pricing. "Hi, Blake. I've been listening to the podcast for approximately six months. You and David are awesome speakers, and I learn so much in every podcast. We applied for the PPP program on April 7 with Chase and never heard anything and just found out the funds are exhausted. Question for you regarding value pricing. I started my practice 26 years ago and was a solo most of the time just doing tax prep, and some tax planning, and consulting in the off season. I am an EA, and specialize in tax only. I learned from my first job at H&R Block to charge by the form. I have done that for 26 years. I am hearing a lot about value pricing, but I don't think it would apply to a tax-only business. 
 
[00:37:01] In our firm, we don't have many high net worth clients and most of our clients only want to see us once a year, or if they have a job change, or increase income and need planning. They just come in for a consult visit, where we charge hourly. We do work year round, and we are trying to grow the tax-resolution side of the business, as I love standing up to the IRS. Just curious about your thoughts with a value-pricing model for a business that only does tax. Thank you and looking forward to the next podcast. Stay safe and be healthy." 
 
[00:37:30] So, if any of you have any advice for Greg, feel free to tweet at us. Here's what I think, Greg. I think that there's an opportunity here to bundle the tax prep with audit support. This is what TurboTax has done forever, right, David? H&R Block, you pay an extra fee and then, they'll defend you.
 
David Leary: [00:37:51] Oh, yeah. At the end, you get to ... It's almost like buying a little insurance policy. 
 
Blake Oliver: [00:37:54] Exactly. Honestly, that's what value pricing is, right, if you listen to Ron Baker, Ed Kless talk about value pricing. It really is, in a way, an insurance policy against future work that you might have to pay for. So, try bundling in all that unpredictable stuff - the tax planning, the audit prep - into the tax prep and then, maybe spread that out over the year. You could charge people in two installments, instead of at the end; or you could charge them quarterly, or even every month, if you wanted. That way, they know, "Hey, if I have a question, I just call. I pay a little extra, but I'm not gonna get hit by an hourly bill." 
 
[00:38:31] You have to model that out and make sure you're not gonna get too overwhelmed with the work that comes in, and you're not billing for it. There's ways to protect yourself with limits. You could set a limit and say this will not exceed so much, or different things, which is ... That's what the software guys do on that audit defense stuff. This is just my take.
 
[00:38:52] Thanks for writing in. Anyone else, if you want to leave us a message, you can email us. I'm blake@blakeoliver.com, or what's even better is you could call us because we love to hear our listeners' voices. You can call us at (202) 695-1040. That's (202) 695-1040. It's a Google Voice number that we set up that goes straight to voicemail. Just leave a voicemail, and let us know what you're thinking; let us know your opinion; let us know a question. We will listen to it and maybe we'll play it on the air.
 
David Leary: [00:39:27] Good luck to another four weeks probably of PPP madness. 
 
Blake Oliver: [00:39:32] Talk to you soon, David. 
 
David Leary: [00:39:32] All right, bye. 
 
Blake Oliver: [00:39:32] Bye. 

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Creators & Guests

Host
Blake Oliver
Founder and CEO of Earmark CPE
Host
David Leary
President and Founder, Sombrero Apps Company

What is The Accounting Podcast?

The Accounting Podcast (formerly the Cloud Accounting Podcast) is the world's #1 accounting, bookkeeping, and tax podcast! Join us weekly for a roundup of accounting news, analysis, and interviews. Plus, earn free NASBA-approved CPE credits for listening with the Earmark app. Learn more at https://earmarkcpe.com.