Get Your Documents in Order, COVID-19 Relief Requires Accurate Records

Your access to coronavirus relief will require documentation, the key to any successful business continuity/financial recovery plan.

Keeping records is probably the last thing you’re thinking about while you try to figure out ways to keep your doors — or at least your drive-thru window — open during the coronavirus crisis. But documents and records may be the things that help you most in securing loans and grant money to tide you over until the crisis passes.

Whether you plan to apply for a Paycheck Protection Program (PPP) loan, an SBA Economic Disaster Injury Loan (EIDL), file an insurance claim or take advantage of the hundreds of grants and short-term loans being made available through local state, community and business development sites, you’ll have to fill out paperwork and offer proof of eligibility.

That requires good records, and now’s the time to not only gather the documents you have, but start tracking your business in minute detail so you have what you need at the ready when it comes time to fill out applications or claims.

Drew Olson, a Partner in BDO’s Forensic Insurance & Recovery practice, states, “The importance of maintaining contemporaneous records during this difficult time cannot be overstated. In past major financial relief efforts, such as the 9/11 terrorist attacks and the BP Oil spill, the difference between funding and denial was if the claimant had maintained contemporaneous documentation on how they were impacted.”

Collect Now

Start by pulling together the important documents you have on file such as:

  • Tax returns and other tax documents
  • Sales history for the past three years
  • Monthly Profit/loss statements – continue to produce monthly P&Ls during the loss period
  • Insurance policies
  • Lease or title documents
  • Payroll records
  • Inventory records
  • Capital improvement expenditures from 2017 to current
  • Monthly utility bills for the past year
  • Client event contracts, both open and cancelled

Start Tracking

To document your business losses due to the coronavirus pandemic, you need to track every detail of your business so you can compare it to the business you’ve done in the past. “Historical sales are, arguably, the best indicator of future performance especially for restaurants with seasonal business,” says Olson.

”Another important indicator are forecasts prepared by management, which will always be scrutinized by how accurate management’s record has been with historical forecasts compared with actual sales. The better the historical forecasting accuracy, the stronger management’s forecasts can be relied on” he adds.

  • Set up a spreadsheet with the app of your choice such as Excel, OpenOffice or Google Docs
  • Add categories as you think of them (lots of ideas are provided below).
  • Backtrack to the first day you had to close or partially shut down and switch to all off-premises service; recreate the steps you took as closely as possible.
  • Record everything on a daily basis, like a diary entry or a captain’s log; be meticulous and dedicated. In a week you won’t remember what happened this week; in a month, the details will be a blur.
  • Have an independent third party — your accountant or bookkeeper — verify financial documents monthly and get them notarized.

Here is some of the information you might want to record in your daily journal:

  • Payroll costs and adjustments from previous payroll periods (i.e., changes in hourly wages, group health care premiums/benefits, severance pay, etc.)
  • Changes in number of employees (layoffs, furloughs, reduced hours, etc.)
  • 1099 forms for independent contractors or 2019 employees who would otherwise be employees in 2020
  • Inventory changes (reduction in quantities/deliveries, changes in pricing, food you donated, write-offs due to spoilage, replacement inventory, loss of any discounts for bulk purchases, ingredient/supply substitutions and shortages, etc.)
  • Vendor changes (changes in vendor contracts, switch in vendors)
  • Change in traffic counts
  • Change in operating hours
  • Change in menu and menu pricing
  • Promotion costs for menu deals or gift cards
  • Lost holiday revenue (compared to prior year, e.g., St. Patrick’s Day, Easter, Mother’s Day?)
  • Marketing expenses for advertising, public relations or increased presence on social media
  • Daily sales (by type of service — takeout, curbside pick-up, drive-thru or delivery)
  • Delivery costs, or car expenses if you’re delivering directly to customers
  • Special equipment purchases (e.g., holding equipment or disposables for off-premises sales)
  • Special service expenses (e.g., signage, dedicated parking for curbside service, etc.)
  • Cleaning/janitorial expenses (especially for following COVID-19 protocol)
  • Maintenance records and invoices
  • Mortgage or lease payment adjustments or forgiveness
  • Professional services (expenses for legal, accounting, consulting, etc.)

Don’t Forget

  • Financial documentation is critical, but it is not the only documentation to be maintained. At some point, you will have to tell the story of your loss and maintaining contemporaneous documentation on how you are being impacted will strengthen your claim package and tell your story.
  • Documentation is needed to substantiate any claims for loss of sales or customers, or extra expenses incurred during the crisis period.
  • Tracking sales trends, business cycles and special sales periods (e.g., holidays) before and after the damaging event is important in demonstrating related losses.

Financial documents can include POS reports or screenshots, bank statements, transaction receipts from banks, quarterly sales tax filings, tax returns and profit and loss statements, among others, but all should be verified by independent third parties and notarized.