Be Smart About Forgiven PPP Funds
During the middle of 2020, when the COVID-19 crisis was in full swing, most of us in the janitorial industry applied for and obtained PPP (Paycheck Protection Program) funds. All businesses were eligible, but the payout to janitorial companies was particularly large, given the percentage of expenses associated with labor.
For many of you, it was like hitting the lottery. Don’t get me wrong, many companies (mine included) needed those funds to keep workers employed and we drained cash to do so. But we also kept our fingers crossed, hoping the debt would be forgiven, and sure enough, that has largely happened.
Assuming you received some amount of money, you may now find yourself in a bit of a dilemma. What do you do with it? As the owner, leader and steward of your contract cleaning company, how do you handle this influx of thousands or millions of dollars? At our company, we used the excess cash in four different ways: giving, owner distribution, debt reduction, and savings.
There are several people that work in our company at the administrative and managerial level who are not eligible for bonuses based on profitability. While our area and branch managers can often make big bonuses, those opportunities aren’t typically there for the folks in human resources and office administration. For this reason, we decided to take some of the PPP funds and use them to give nice bonuses to this portion of our workforce. Everyone in that group, lowest paid to highest, got the same amount of money. It was a great way to bless those team members.
During 2020, many companies were hesitant to take too much cash out of the business due to future uncertainties. As such, owners may have taken home less money than normal, as cash was needed to keep otherwise laid off workers employed. When the PPP funds were forgiven, this was a chance for the owners (myself included) to take home some cash. For us, this was a relatively small amount compared to the total funds forgiven.
If you find yourself with excess cash due to PPP forgiveness, consider paying off any existing debt. At my company, our plan is to pay off some remaining vehicle and acquisition debt. This will put our company in a debt-free position by the end of the year. Debt is an anchor to your organization, and when the future is uncertain, being debt-free can be a huge advantage.
Lastly, consider boosting your rainy-day fund. Every cleaning company needs a healthy savings account to handle new job startups, expansion, asset purchases, or even economic downturns. Three to six months of overhead expenses is a good place to start. With little to no debt and a healthy savings account, your company will be on solid footing and ready to face whatever challenges the future may throw at you.