How We Leveraged Xero and Wagepoint for Canadian Covid-19 Subsidies

When it was apparent that COVID-19 was going to put a major dent in the day-to-day lives of Canadian individuals and businesses, the government of Canada sprung into action.

The government released a variety of measures to ensure that individuals still received some sort of paycheque and that businesses had the liquidity necessary to continue paying employees if they suffered a downturn in revenue.

As information regarding the various subsidies started to come out, accountants across the country also sprung into action.

As of now, we’ve helped numerous businesses with various government grants that are still ongoing today. Our team has filed dozens of Canada Emergency Wage Subsidy (CEWS) applications and has consulted on CEBA applications and the 10% Temporary Wage Subsidy.

But now that the funds are flowing, we’re responsible for the other side of the coin - ensuring that the transactions are accounted for and accurately reflected in our clients’ balance sheet and profit and loss reports.

FIRST - WE HAD TO GET THE INFO - AND QUICKLY!

The most challenging subsidy of all was CEWS. At first, information was being provided from multiple sources and it wasn’t clear who could/couldn’t qualify.

Finally, when things were more clear, in order to determine which clients could qualify, we depended heavily on Xero.

Could we have received this info if our clients were in other accounting systems or in no systems at all? Eventually, yes. But, it would have been really unorganized, it would have taken much longer to verify and and our clients would have been exposed to an audit and even payback of the grant.

More importantly though, some clients were severely impacted by COVID-19 and needed the subsidies/funds as soon as possible to keep operating.

With Xero, we were able to create a custom reporting template that allowed us to grab necessary information from our client accounts really quickly. Thanks to our team for moving so quickly on this!

QUALIFICATION METRICS

The Canada Emergency Wage Subsidy is a grant that provides employers with 75% of an employee’s salary up to a maximum threshold ($847 maximum per week). If you’re looking for more information on the subsidy, read our blog post here. For some companies, that’s a lot of money and could be the difference between shutting down and continuing operations.

To qualify for the program, eligible companies would need to show that revenue declined by 15% in March 2020, compared to either:

revenue in March 2019; or
average revenue in January and February 2020.

And for April and ongoing months, you’d have to show a 30% drop in revenue using the same pattern.

To complicate matters, the government allowed businesses to report under the ‘cash method’ if it helped them to qualify for the program (as opposed to reporting their financials using the accrual method - which is usually more common).

THANK YOU TO XERO

Starting with the month of March 2020, using Xero Report Templates, our team set up a report pack that brought all the necessary information to the forefront. We needed:

Revenue for March 2019
Average revenue for January and February 2020
Revenue for March 2020
Percentage change

We created some formulas to get us the percentage change and voila, mission accomplished. We were able to deploy this single report across hundreds of clients to determine eligibility under the ‘accrual’ method:

But what about the ‘cash method’ you say?

We actually don’t know how we would have obtained this information in other legacy systems. In Xero, it required a few clicks and we had our ‘cash’ basis reports:

These reports proved to be super valuable as we were able to determine which clients qualified for the March CEWS claim. We then followed the same process for subsequent claims (i.e. edited the layout to present April figures instead of March).

Remember, we didn’t have to access each client account and create this new report from scratch in their individual Xero accounts. Instead, we created the report one time and it appeared as a ‘custom’ report in all of our client accounts.

NEXT STEPS - AND THANK YOU TO WAGEPOINT!

The CEWS application required some complex calculations and payroll expertise. Without our friends at Wagepoint (where most of our clients’ payrolls reside) it would have been very time consuming to obtain the data we needed to complete the application. Through their ‘Reports Library’ section, we downloaded various reports that provide us with the information we needed (pay periods, income types, pay information, etc.).

Wagepoint was really great because they moved quickly to embed the ‘10% Temporary Wage Subsidy’ directly into their app. This provided companies with some much needed short-term cash. And subsequently, on the CEWS applications, that number was required and was easily obtainable from Wagepoint.

Other payroll apps (Rise, ADP, Ceridian, Wave, Humi) proved useful as well and we were able to obtain the necessary information we needed to calculate baseline pay and the subsidy amount to claim. We did find Wagepoint reports to be very helpful though.

SOME SHOUT-OUTS

Firstly, a huge shout-out to our own team for helping sift through a ton of information early on and then finally coming up with the custom reports and processing/reviewing the claims: Michael, David, Tom, Adam, Morgan and Mat.

Also, thanks to Jay Goodis and Tax Templates for their ongoing help and support and for the use of their fantastic templates (the CEWS template was just one of the templates that came in handy). If you haven’t had the chance to check out their everyday tax templates, please do so - they are extremely valuable.

NEXT ON THE BLOG - BOOKKEEPING FOR COVID-19 GRANTS

Keep an eye out for our next blog where we discuss how to accurately record and bookkeep the various grants received so that your balance sheet and profit and loss statements are in tip-top shape. More specifically, we’ll be discussing how to accurately reflect the following grants in your books: