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Claiming Government Research Credits: Time Tracking Software Eases the Pain

Successfully claiming credits through government innovation initiatives, like Canada's SR&ED and IRAP programs, requires good record keeping. Preparing and backing up an application can consume significant resources, and defending a claim during a periodic audit or spot-check can be a particular challenge. Good time capture software dramatically simplifies the process.

Challenges

  1. Preparing and filing claims is time consuming and distracting.
  2. Undocumented or cancelled projects are often forgotten at claim time.
  3. Auditors challenge poorly documented effort.

Successfully preparing a proposal or claim for government incentive credits under an innovation program such as Canada's SR&ED (Scientific Research and Experimental Development) or IRAP (Industrial Research Assistance Program) can take many hours away from some of your most valuable resources.

A key to minimizing this cost is to use a system that captures and reports on qualifying activities separately from other work. Accomplishing this without good software can involve countless hours sorting through e-mail trails, meeting summaries, project notes, design notes, log books and other documents to determine what activities qualify and estimate how much time was spent on each.

Add to that the risk of asking for less than you spent in order to avoid potential pushback from government reviewers. "You end up being more conservative when you do not have real estimates, to avoid being challenged by the auditors," says experienced SR&ED claims filer Andrew Cunsolo of Talent Technology, a developer of human resource software.

Cunsolo should know since he has filed claims successfully with and without the help of software tools. Cunsolo estimates that the use of his preferred time tracking software, TimeTiger, saved the company 40 to 80 person hours spent preparing his recent SR&ED claim.

Many companies will hire a consultant to off-load claim preparation chores but this will produce little value if the consultant is not sufficiently familiar with the business and the company's technology, as well as the subtleties of the application and review process. On the other hand, a well-chosen consultant who takes the time to interview the right people, request the right documents, and spend sufficient time ferreting out every eligible expenditure can get the job done faster, help maximize the size of your claim, and manage any future audit more effectively.

Consultant or not, a systematic time capture process can be invaluable. It should be designed to easily identify qualifying activities and collect detailed activity descriptions. Auditors are just as likely to question the eligibility of entire activities and programs as they are to target individual costs being claimed. When they do challenge costs, auditors tend to assess whether the nature of the activity is consistent with the costs being claimed and relate it back to industry norms and costs claimed in the past for similar activities. A methodical, well documented work log is your best defense in such situations.

Recommendations

  1. Implement a system that lets you identify qualifying activities and makes effort tracking easy for your team
  2. Track time as you work, weekly or even daily.
  3. Make best use of consultants by handing them detailed data for preparing claims.

"Remember that you claim costs per problem, not per project," says Lisa Heath of MediResource, an online publisher of health information. Heath recently filed a successful IRAP claim for improving the search functionality of MediResource's web publishing platform. "Time spent thinking qualifies. You need to be able to capture that and justify it," says Heath. Cunsolo concurs, "I do not have time to track down every activity and then decipher each person's method of recording information."

Making it easy for your team to submit time can be just as important to ensure that all qualifying activities are captured and justified. For example, the software used by Talent Technology and MediResource, TimeTiger, provides a To Do window that lets users track time while they work. Each user has a personal list of activities unique to them. "The list reminds users to track their time. The relevant tasks are there so the time can be recorded quickly without much thinking. Developers do not waste time searching for the tasks they worked on from a long list," says Cunsolo.

Heath leverages TimeTiger's design features further. "IRAP requires you to name staff, so we have matched the time capture structure to our project plan. We have also created SR&ED categories in TimeTiger."

Outcomes

  1. Time and effort saved.
  2. No under-estimated claims.
  3. Audits simplified and accelerated.

The traditional "paper timesheet on a screen" design for time tracking software can be problematic when it comes to submitting claims for government research credits. This approach does not easily allow users to describe their activities in detail, and forces them to remember, estimate or back-calculate their efforts. When it comes time to prepare research claims, making sense of the work that was done can be a frustratingly inaccurate process which often results in underreported costs or the even the exclusion of entire projects. On the other hand, tracking time as work is being done and entering detailed descriptions at the same time results in a clearer picture of the progress made towards research objectives.

Submitting research claims for government innovation initiatives does not have to be painful. You can maximize your return by systematically identifying qualifying activities in advance. Choosing software designed to capture detailed time records and describe qualifying activities while your team is working eases the pain. Good software provides an organized log of qualifying activities, simplifies the process and helps you keep your auditor happy.

Copyright © 2007 Indigo Technologies. Written by Shawn Nisenboim of Indigo Technologies. For more information about how you can capture project time to support government research claims, e-mail us at sales@indigo1.com.


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