At the end of October, Research Infosource Inc. released their 2010 study on R&D spending in Canada - Canada's Top 100 Corporate R&D Spenders List 2010 (available on their website at www.researchinfosource.com). What they found may not come as a surprise. Overall, there was a decrease of 1.8% in spending on R&D in Canada’s top 100 corporate R&D spenders. (Fiscal 2008 saw spending at $10.4 billion, whereas Fiscal 2009 saw spending at $10.22 billion.) This is the fourth year in a row where there has been a decline in R&D spending.

In Fiscal 2008, 19 companies had spent over $100 million in R&D. Even though the overall amount of money spent on R&D decreased, in Fiscal 2009 there were three additional companies who spent over $100 million in corporate R&D. Altogether, these 22 companies spent over $7 billion – making up the majority of the total R&D spending in Fiscal 2009. Unfortunately, some of the companies that had spent over $100 million in Fiscal 2008 saw a decrease in spending in Fiscal 2009 – with the largest declines seen by Nortel, BCE and Magna International. On the other hand, RIM, Telus and Ericsson Canada saw some of the greatest increases in R&D spending.
What are the biggest indicators as to why we shouldn’t be surprised about these numbers? As this is a survey of what happened last year, we need to recall one important event: the economic recession of 2009. A lot of companies had to cut expenditures where they could, and unfortunately, this oftentimes meant that R&D was often not seen as a necessity to stay in business.

There is also the fact that some of the biggest players were the ones who saw the largest decreases. Take Nortel for example, who was formerly at the top of the list, and saw a decrease of 48.5% on R&D spending between 2008 and 2009. The largest spender of R&D suddenly dropping 48.5% can without a doubt cause a large difference in total R&D spending.

"AIIM has been working successfully with NorthBridge since our 2003 claim, where we were able to claim both print projects and IT projects. The SR&ED program has been vital for our reclaiming of costs spent on the development of these projects. Working with Northbridge over the years has fostered a relationship that has contributed to our continual success as a leader in the printing industry."

Position SR&ED Team Specialist
Years working in industry Since 2002 (8 years)
Educational background Engineering Mechanics & Astronautics, University of Wisconsin - Madison
Professional Memberships and Designations APEGBC (EIT)
Hobbies/Interests Sailing, Skiing, Photography, taking things apart to learn about their inner workings - but eventually breaking them
Biggest non-work-related accomplishment Maintaining a long distance relationship with his fiancée - they will be married in March 2011. Congratulations Matthew!

Are you a company in the Greenhouse Industry looking for information on how to access low cost operating financing, lease Financing or SR&ED tax credits? If so, you are invited you to attend one of the meetings listed below.

December 7, 2010 9:00am - 11:00am
Greenhouse Vegetable & Floral Growers
Pelee Days Inn
566 Bevel Line Road Leamington Ontario

December 7, 2010 7:00pm – 9:00pm
Nursery Landscape Growers
Best Western Beacon Harbourside
2793 Beacon Boulevard Jordan Ontario

December 8, 2010 9:00am - 11:00am
Greenhouse Vegetable & Floral Growers
Best Western Beacon Harbourside
2793 Beacon Boulevard Jordan Ontario

Dates to Remember

December 2 – 9 Hanukkah
December 21 Winter Solstice
December 25 Christmas Day
December 26 Boxing Day
December 26 – January 1 Kwanzaa
December 31 New Year's Eve
December 31 June 2009 FYE claims due now

In order to expand our service offerings, NorthBridge Consulting Services has begun working with NorthSpring Capital Partners, a private equity firm seeking to make investments in privately held companies and NorthLink Capital Advisors, a transaction advisory firm focused on providing merger and acquisition, divestiture and capital raising advice to business owners.

"We believe that this underscores our commitment to provide the experience and resources to meet the evolving needs of our clients who seek comprehensive advice," says Sol Algranti, President and CEO of NorthBridge Consulting Services.

NorthSpring Capital Partners provides between $250,000 and $1 million in risk capital to small and medium sized companies across a variety of traditional industries located in Southern Ontario. “Our goal is to build long-term relationships, as a minority investor, with capable and experienced management teams,” says Brian Hunter, President of NorthSpring Capital Partners.

NorthLink Capital Advisors is focused solely on providing merger, acquisition, divestiture, capital raising (private equity) and financial restructuring advice. “NorthLink has a strong bias towards lower mid-market companies that are under-represented with professional advice and are not well served by larger firms with high overhead costs. Our goal is to deliver the expertise, research capabilities and professionalism of a larger organization to smaller businesses,” says James Ro, a partner at NorthLink Capital Advisors.

The Conference Board of Canada released a report on October 15th, 2010, looking at how immigration affects innovation in Canada. Their findings? Immigrants can be a huge benefit for companies that are looking to become more innovative. In fact, the same drive that brings these immigrants to Canada is what pushes them to be more accepting of working with the risks that innovation often is accompanied by. According to Michelle Downie, author of the report, these immigrants “tend to be very driven and they want to exceed their own expectations, so they're always pursuing more and trying to work harder.” Another main reason why this may be the case is that immigrants will bring a different perspective to the table, and diversity of perspective can be important when it comes to innovation.

Global Commerce Support Program: Going Global Innovation

NorthBridge continues to bring you the latest updates and hot topics that are important to our clients. Some of our November highlights:

Part 2: Once We’ve Filed, What’s Next?

The final technical reports and financial expenditures were submitted to the CRA; the process was very linear and took a minimal footprint, right? So next on the agenda for future claims are R&D tracking improvements.

The CRA may be a finicky bunch, but only because they have to be. The reviewers need to see some specific documentation when reviewing these claims and NorthBridge knows what they are. One of the most important aspects of research is the collection of data. Unfortunately, many companies do R&D on the fly and don’t always consider the work they are doing as research. Thus, this work doesn’t get tracked. This is where we come in. If the CRA does want to review the projects submitted in subsequent filings, they need to see collected project data and corresponding hours.

NorthBridge has several stages to improving tracking of documentation as it relates to R&D and SR&ED eligible activities. It sounds daunting but it quite easy to implement and maintain as long as the people involved are informed of the processes properly and what the end-benefits are.

Training seminars. We will come in and meet with group and individual employees to clearly define what the reality of SR&ED is and how it can be identified. Sometimes people think everyday headaches and challenges are just part of the job; we are there to let them know that this is the type of stuff our clients need to track. The meetings also put a face on a process that is generally regarded as tedious, and introduces staff to the reality that this is not a lot of work and can show a level of innovation that has been previously overlooked!

Data collection. Adding additional work to any employee is not going to be well received. But, once they hear how much money this means for their department (upgrades, new equipment, additional supporting labour, etc.) they will start to get a little more comfortable. It only takes 5-10 minutes per week to collect data – it’s just a matter of keeping on top of it. NorthBridge provides a detailed and customized process to track R&D hours and expenditures, which can be adapted to any size company and any department (even the most rudimentary).

Tracking particulars. The top-down approach is the best way to start the implementation. Working with the existing time management systems and the people who manage them is the key to success, simply because the staff is already comfortable with using them. We then focus on different departments to enable everyone to begin capturing hours. The integration and improvement of the tracking is a few hours at most but ensures that if there ever is a review, the data is there and irrefutable.

Continued support. Northbridge knows that even at the best of times people are just putting out fires as they go. Tasks are prioritized, and tracking can shift from the “To Do List” to the forgotten stack. Fortunately, we know and understand how much money is at stake every year for our clients, so we keep on top of it. Love it or hate it, we send out emails, do follow up calls and ensure the hours are being collected properly. It only takes a few reminders and a couple of minutes per week to guarantee the eligible monies are returned each year.

Of the entire SR&ED process, our clients typically regard this portion as the most involved. It shouldn’t be taken as a negative since it improves departmental communication and sheds light on previously unidentified innovation (as well as guaranteeing the annual expenditure recapture). We make the transition as easy as possible, but we need your help to get it done right.

NEXT MONTH: Part 3 – OK, we have tracking down, what's next?