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PPP Can’t Do Everything

Caleb Newquist Editor-at-Large, Gusto 

Round 2 of PPP is here. New Gusto bulk reports let you customize the date range and select clients who are now eligible for additional relief. If you downloaded the PPP report before January 19, 2021, redownload it to ensure you have the latest version, updated with the new US Treasury Guidance. Go to the COVID-19 tab in Gusto Pro.

Did PPP work?

We’ve discussed various aspects of the Paycheck Protection Program (PPP), and it’s fair to say that it’s been far from perfect. Still, the ultimate question remains: Did it help?

By one count, the program saved close to 19 million jobs. By others, it’s somewhere between 1.4 million and 3.2 million. And with a total price tag of $806 billion, you can see the point. “It’s just a really inefficient use of funds,” says one economist in the New York Times. And here’s another guy from the “Meh” camp:

“A very large chunk of the benefit went to a very small share of the firms, and those were probably the firms least in need,” said David Autor, an M.I.T. economist who led one study.

Scott Galloway of New York University puts it in slightly stronger, non-economic terms. By contrast, the thinking goes, unemployment benefits, food assistance, and other aid have had a more direct impact than PPP.

But this all misses the point, says another group of folks. PPP was supposed to save businesses, not jobs:

[B]usinesses […] employing fewer than 10 people […] account for only 10 percent of U.S. jobs, according to data from the Census Bureau. But they account for 77 percent of all businesses. Glenn Hubbard, a Columbia University economist who was a top adviser to President George W. Bush, said it would be a mistake to let those businesses fail, even if their employment impact is small.

“You can’t look at cost per job saved,” he said. “It wasn’t the goal. The goal was preserving businesses.”

You can see it from this perspective, too: When businesses fail, there are no jobs to go back to. And not only would those businesses’ economic activity go away, the cumulative activity—the work that went into building those businesses—gets wiped out. That, uh, legacy capital, let’s call it, can’t be re-created by a new business in a week, a month, or even year. By preventing a multitude of business failures, PPP also prevented a whole lot of economic infrastructure destruction. The article cited one paper that found “those receiving P.P.P. loans were 20.5 percent more likely to say they expected to survive six months.”

So was PPP supposed to save business or jobs? The name kinda seems to give it away. Still, I’m sure the architects of it are less concerned about the academic nuances and are just thankful that some people say that it has helped at all rather than making things worse.

Elsewhere in PPPThe AICPA has some concerns.

Accountants do all the things

Surewhy not:

Environmental, social and governance (ESG) issues are steadily becoming the responsibility of accounting and finance professionals, according to the Association of International Certified Professional Accountants.

In a release on Wednesday, the Association shared six ESG trends affecting accounting and finance professionals in 2021, with a main point being a shift in responsibility of ESG matters from sustainability and marketing departments to the inclusion of accounting and finance teams.

As someone who used to be on the accounting side of things but now resides on the marketing side, this makes perfect sense. ESG issues went from being something that businesses used to attract attention to something they now have to deal with. I imagine these conversations going something like this:

Marketing: We sure love talking about environmental, social, and governance issues. It’s so ON BRAND for us.

Management: People are starting to expect us to talk about how we’re making progress on this stuff. Are we tracking these things?

Marketing: Uhhh… right! Accounting? Can you help? This feels like an excellent opportunity for something you could really own.

Accounting: Huh?

Marketing: Thanks, Accounting!

But don’t just take the word of my silly scenario. Someone from the Association of International Certified Professional Accountants is volunteering you all:

“CPAs are uniquely qualified to help organizations increase stakeholder trust and confidence,” said Desiré Carroll, senior manager – public accounting at the Association, in a statement.

I’ll bet you didn’t even know how uniquely qualified you all were.

Clients in denial

“Almost no one thinks their company’s falling behind because of COVID-19” is the headline here, and, oh boy, who’s gonna tell them?

Despite the general decline in revenues, approximately one-third of the IMA’s survey respondents felt they were doing better than their competition, and less than 10 percent thought they were lagging behind their competitors.

As accountants, you are uniquely qualified to help organizations with this. I even wrote about it once. I’m sure for a few businesses the overconfidence is warranted, but it just seems foolish for so many to be all, “Yeah, we got this. Everyone else is screwed, though.” Try to let them down slowly.

Fresh from Gusto

ICYMI: The On the Margins archive is now online for your reading and sharing pleasure. We’ll continue to add past editions until they’re all available. Here’s more stuff from Gusto:

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Caleb Newquist
Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, daughter, and two cats.

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