The current economic recession has proven to hit even harder than many economists anticipated. An estimated 129,000 Canadians lost their jobs in January alone, of which Statistics Canada reports that Ontario workers lost a staggering 71,000. Alberta, once a thriving, profitable province, is even feeling the blow, having recently announced another 15,000 jobs lost. Forecasters predict a loss of yet another 250,000 manufacturing jobs over the next five years if the Canadian manufacturing sector follows similar trends occurring within the developed industrialized nations.
For several industries, there is little to no chance of a significant sales increase in the near future. With businesses grasping at straws to stay afloat in this downturn, it is more critical than ever to find a way to increase revenue.
Canada is internationally heralded as a leader in R&D funding for domestic-owned small to medium sized enterprises. The SR&ED program (Scientific Research & Experimental Development) is one avenue that businesses, especially manufacturers, can pursue to improve their bottom line. The goal of the federal SR&ED program is to encourage experimentation and technological advancements within Canadian companies, and this is of particular benefit in the recovery of our economy.
“Companies need to sit back and assess their individual circumstances. It’s time for a second look at the SR&ED process, whether you’ve claimed previously or not.” says Ajay Sinha, VP Operations with Northbridge Consultants. “That old adage is true – knowledge is power. In regards to capitalizing on the benefits of SR&ED, it is worthwhile to seek assistance from a reputable SR&ED consultant.” Sinha is reminding clients that the CRA has hired more auditing staff and made many revisions to the T661 and filing process. He emphasizes that navigating the maze of technicalities correctly is imperative to maximize the size of your claim, and increase the rate of approval to enlarge the dollar amount of returns or tax credits. “It’s a sink or swim situation.”
Sinha mentions that “For those who have had a negative experience or have been disappointed with the results, it is often due to qualifying activities that have been overlooked, and thus not claimed for, resulting in a much smaller return, or in some cases, rejection of the claim.”
Many companies use their SR&ED returns of offset incurred development costs. Alternatively, funds can be invested in new equipment and materials, new hires, or even facility expansion. Sinha adds “We also teach our clients how to track their future eligible activities to make documentation for claims easier and more substantial. This promotes repeated success with the program in the future. The extra resources to put towards the advancement of technology also give Canadians that edge above competitors internationally.”
On Friday, March 6th 2009, Northbridge Consultants will be holding another free breakfast seminar, to provide a useful information sessoin on the SR&ED program. The seminar will be held at the Waterloo Inn Conference Hotel. Details can be found at http://www.northbridgeconsultants.com/sr&ed-news-events.php
For more information, email info@northbridgeconsultants.com or call us at (519) 623-2486.
In 2008, quite a number of changes took place regarding the SR&ED program. For one, the CRA hired a slew of auditors for SR&ED, increasing the likelihood that a technical and financial reviews will take place, no matter how solid the claim. For some businesses, especially first time claimants, this has proved to be daunting in attaining a significant return.
It is now more important than ever to have strong, solid, properly documented projects and to know one’s way through the maze that is the new T661 forms. When it comes to describing project activities, you are now limited to 1400 words as opposed to a full twelve page narrative. If the necessary requirements of technological uncertainty and advancement are not adequately supported, claims run the risk of being rejected, or at least of having certain activities disqualified, thus reducing the size of any return received.
Fortunately for rejected claims, if the 18 month period after fiscal year end claimed for has not expired, an objection can be submitted to the CRA within 90 days of receiving the notice of assessment. if you feel that your project does in fact meet SR&ED requirements, it may very well be worthwhile to pursue an appeal. The CRA outlines the appeals process on their website at:
http://www.cra-arc.gc.ca/txcrdt/sred-rsde/pblctns/p2000-02r-eng.html#tphp
All in all, the hassle of submitting objections and pursuing an appeal is time consuming. This can be avoided altogether with the use of a consulting expert. An experienced SR&ED consultant assess projects and handle the filing for you can be extremely valuable. In addition, should claims be called to review, Northbridge Consultants readily will accompany you to the CRA review location. While it is necessary that you attend and represent your projects, Northbridge provides assistance in the defense of any activities or documentation that may be disputed by the auditor.
Entrepreneur.com outlines 50 ways to save money in your business.
Here are some of my ideas on how to increase your cashflow:
- Call in your Account Receivables the moment they’re due. Waiting to collect your AR reduces your cash flow substantially.
- Collect a portion of the payment up-front, prior to services being rendered.
- Stretch out the amount of time you take to pay your Accounts Payables (AP). Pay at the last moment possible to maximize your cashflow.
- Review your AP records for overpayments and ensure that all sales taxes are fully recovered.
- Empower your employees to develop cost-cutting operational efficiencies.
- Strive for increased operational efficiencies in order to reduce inventory. Just In Time (JIT) or Lean manufacturing processes reduces inventory and increase cash flow.
- Liquidate excess inventory. Excess inventory is a double-negative because it not only requires extra warehousing/overhead/insurance costs to storehouse, but it also ties up cash flow.
- Take advantage of federal programs like IRAP and SRED.
- Barter with companies to achieve trade efficiencies through small business bartering.
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