For larger companies, managing SR&ED claims can be a complex and highly detailed process due to the volume of projects, employees, and data involved. Effective tracking methods are essential to ensure that SR&ED activities are identified, documented, and supported with the appropriate evidence. Further, companies that are identified by CRA as having large SR&ED claims are at high risk for annual audits. Here are several tracking methods that can be implemented in larger companies to streamline the SR&ED process.
Project Management Software with SR&ED Integration:
Examples of management software which can be integrated with SR&ED are Asana, Trello, Jira, Monday.com. Companies can integrate SR&ED-specific tracking within these project management software to monitor R&D progress. For each project, teams can log SR&ED-related activities like experimental development, testing, and innovation milestones.
The benefit of using systems like this is it centralizes R&D project data, allows teams to attach notes, documents, timelines and provides a clear audit trail for SR&ED documentation.
Time Tracking and Activity Logs:
Commonly used time tracking tools include Harvest, Toggl, or proprietary time-tracking systems. This allows companies to implementing a time-tracking system for employees working on R&D projects and can provide detailed records of hours spent on SR&ED activities. Team members can track time spent on experimental activities versus routine work. This will provide clear evidence for eligible R&D hours, helps distinguish between SR&ED-eligible work and non-eligible activities and improves transparency and audit readiness.
Technical Documentation Management Systems:
Tech documentation systems such as Confluence, SharePoint, or custom databases can be used. These systems enable the storage and management of technical documentation, including project plans, technical reports, hypotheses, testing results, and experimental outcomes. Having a centralized system for R&D documents helps ensure that the information needed for SR&ED claims is organized and accessible. This ensures that all technical details are documented in a consistent manner, facilitates easy retrieval of evidence to support claims and reduces the risk of missing or incomplete documentation in the event of an audit.
Dedicated SR&ED Tracking Database or Spreadsheets:
Companies can create an internal SR&ED tracking database or use a spreadsheet to capture essential information about each project. Fields might include project name and description, start and end dates, key milestones (hypotheses, experiments, challenges, results), employee hours dedicated to SR&ED and types of costs (salaries, materials, overhead). This provides a simple way to track all SR&ED-related data across multiple projects, is easily customized to company-specific needs and allows for periodic updates and progress reports.
Collaboration Tools for Cross-Departmental Tracking
Slack, Microsoft Teams, Google Workspace are a few programs that can be used to cross-departmental tracking. Collaboration tools can be used to ensure clear communication among different departments working on SR&ED projects, from R&D to finance. Channels, project-specific chats, or file-sharing systems can be set up to maintain clear documentation and ensure all team members are aware of the SR&ED requirements. This helps in collecting information from all relevant departments (e.g., engineering, IT, finance) for comprehensive SR&ED claims.
Automated Workflows for SR&ED Reporting
Many larger companies can develop automated workflows that trigger when certain SR&ED-related activities occur (e.g., new R&D projects, changes in project status, or milestones reached). This ensures that employees are prompted to document certain key details in real-time, reducing the risk of overlooked information. This can reduce manual errors in documentation and alert management to any missing or incomplete data that needs attention to shore up.
Regular SR&ED Review Meetings
Hold monthly or quarterly review meetings with the SR&ED team (including project managers, R&D leads, and financial officers and your external SR&ED consultants) to discuss the status of ongoing R&D activities and any updates to documentation or eligibility. This ensures a proactive approach to claiming SR&ED by reviewing on a regular basis, identifying potential claim issues or missing documentation, identifies new projects with greater detail while it’s fresh in everyone’s mind.
Improving SR&ED Compliance and Audit Readiness
Implement periodic internal audits or compliance checks to ensure that all SR&ED activities are being documented accurately and in accordance with program guidelines. This could be done through internal audits or external SR&ED consultants. This will identify gaps in the SR&ED documentation process before a formal audit, ensures that your company stays compliant with SR&ED requirements and helps avoid penalties or disallowed claims during the CRA review.
SR&ED Audit Preparedness Strategies for Large Companies
Companies with large tech teams often face the complexity of managing their SR&ED claims, which involve numerous moving parts. SR&ED audit preparedness is crucial for these companies, as CRA reviews large claims more frequently than those from smaller businesses. Companies in the larger claim category should carefully review their SR&ED processes and strategies to ensure optimal audit preparedness. By focusing on SR&ED audit preparedness, you can reduce internal time and minimize the risk of CRA denying projects or reducing the claim size during an audit. As experienced consultants, we specialize in helping large companies develop effective strategies for SR&ED audit preparedness or enhance existing practices. This approach ensures that over 90% of the SR&ED process is managed effectively, while also increasing ITCs and providing crucial support in the event of a CRA audit.
RDP’s experience has been that if CRA is satisfied with the SR&ED tracking process to capture relevant SR&ED documents and information, then it can avoid time consuming CRA SR&ED reviews.
If you have any questions surrounding SR&ED strategies, we’re happy to have a preliminary call. These processes do not solely need to be implemented with larger companies. These can be of benefit to SME’s as well.
