Why It May be Important to Temporarily Pay Your Providers Based on Production and Not Collections
As you open up your practice and start working again you are going to want to be sure you use the funds you receive from the Payroll Protection Program (PPP) to meet the requirements for debt forgiveness under the program. After receiving the funds you have 8 weeks to use them for:
- Payroll Costs (75% of the total proceeds must be used for payroll costs)
One of the challenges you will have is paying providers that are on collections in the short 8 week period to meet the requirements under the PPP. As production ramps up collections will lag pushing payments for collection based compensation out beyond the 8 weeks.
- Temporarily transition providers from pay based on collections to pay based on production
- Keep this in place until December 31, 2020 with a year-end true-up (reconciliation)
- At year-end you will calculate compensation paid based production and subtract compensation based what it would have been based on collections. The difference will be owed by the provider to the practice.
We anticipate Regulations being issued to provide guidance on this and other issues.
Greig Davis CPA CVA MST - Dental CPA
Dental ROI Associates PC – Dental CPA’s
Results by Design