One of the questions we hear most when first engaging with customers is How should I be tracking my tax credit eligibility?
Or, more specifically for our Canadian partners, How do I track my SR&ED?
While this might sound like the right question—after all, tax credits are one of the reasons you likely partnered with Boast in the first place—it sort of misses the point of what we do.
That’s because we know how valuable your time is, and that goes for your developer teams too. Determining which of your projects or activities qualify for R&D tax credits or government grant programs is simply not something you should be focused on.
Because that’s our job.
As a company, your focus should be on driving innovation and building new solutions. Your tax credit eligibility will be a result of that focus, but it should never be the core driver of your R&D strategy.
While your team is working hard to innovate and build new solutions, Boast AI is designed to actively monitor tax credit eligibility by syncing seamlessly with the project tracking systems your R&D team should be using to coordinate workflows. This allows your developers to focus squarely on the work at hand, while our platform intelligence and tax professionals work to maximize your claim.
For any of this to work, however—including keeping your developers in sync and costs in line—you need to be documenting your activities and tracking your workflows. Not doing so will have much larger repercussions beyond your tax credit or grant eligibility, too.
Project tracking is key to optimizing R&D
Both the IRS in the United States and the CRA in Canada recommend that any business applying for innovation funding are tracking their workflows—ie. Timesheets, project plans—as table stakes. That’s because these federal agencies view this as a business best practice, and abiding demonstrates to these government bodies that due diligence is being conducted across your product team (which, in turn, may enhance confidence in your organization among agency officials—or even auditors).
While it would be ideal for your team to be tracking every minute of time spent working toward R&D and product development, we also understand that it simply may not be realistic. This is especially true for earlier stage businesses who may not be formally tracking all of the ad-hoc activities that ultimately contribute to R&D.
So while 100 percent time tracking may be the gold standard, any kind of documentation that helps tie activities to costs and outcomes will be useful not just for determining your claims, but for ultimately managing and optimizing your product roadmap and strategy.
This point bears repeating, as accurate time tracking is so much more than just a funding imperative. It’s the best way for you to improve your operations and inform valuable decision making down the line.
This goes for both activities that, on their face, are explicitly tax credit-eligible, as well as any non-creditable time. The important key here is that it’s not on your team to distinguish the difference.
The best thing that your developers can do to communicate the nature of the project to the R&D and SR&ED tax pros at Boast AI is to be consistent about collecting documentation—from mundane details to groundbreaking innovation—and leaving it to us to craft the story.
Key Documentation for Project Tracking
Here are the kinds of documentation that your teams should do their best to collect:
- Records of technical challenges – Record all technical challenges faced during development. This includes detail on experiments conducted, prototypes created, iterations, testing, and analysis of test results.
- Version control for all technical documents – Track this in architecture documents, design documents, as well as source code to record the evolution of the system.
- Software prototypes – Include notes on the analysis of the prototype.
- Test documents – Save test cases, results, and analysis, including dates and who performed the testing.
- Developer Notebooks – Keep all handwritten developer notebooks (and be sure they’re dated).
- Meeting minutes – Include the date, attendees and duration of the meeting, as well as descriptions of any technical issues discussed.
- Whiteboard photos – Take pictures of software designs created on whiteboards and save with project documentation.
- Emails – Track email exchanges with labels when relevant challenges were discussed.
And maybe most important, Timesheets.
Ideally, all employees involved in R&D should track 100 percent of their time, regardless of whether it’s implicitly tax credit-eligible or not. This gives Boast AI the best vantage to accurately calculate R&ED and SR&ED tax credit eligibility—especially when time tracking systems include notes and Documentation on activities and technical challenges encountered.
However, we understand that some time is going to fall through the cracks and not be tracked. That’s where having thorough documentation becomes an asset and can help fill in any blanks by adding context to your time-based record.
As a baseline, however, time keeping should be broken down by Project and Activity when teams are tying specific actions to outcomes. While these are pretty broad catch-alls, here are the Activities that will be the most relevant to a tax claim (see our infographic, Technology Readiness Levels, Explained to learn more about the various activities expected at different phases of R&D):
- Technical Requirements
- Technical Analysis
- Technical Supervision
- Data Collection
- Non-SR&ED (catch all for all other tasks not captured by the activity types above)
Where you capture all of this information, however, is another important consideration. Depending on the size of your organization and scope of your R&D, the system that you use could be as simple as an Excel spreadsheet, or could be a 3rd party time tracking system.
Examples of third-party systems include Jira, Toggl, and Harvest, to name a few.
While we pride ourselves on Boast AI’s ability to integrate with whatever platform works best for your team, there are some criteria and Best Practices that you should follow closely regardless of which method for time tracking you deploy.
Time tracking best practices
Step 1: Use your project management system’s natural hierarchy
Depending on which system you use, there will be a ‘natural hierarchy’ of relevant information that it will ask you to track. Don’t shake this up; the platform was designed this way for good reason.
By following the information data structure that your platform (ie. Jira) recommends, you are increasing development velocity, transparency, and communication across your company as you scale, while also giving Boast AI the context we need to draft your claim.
Most importantly? This hierarchy arms you with the visibility to understand who is working on what and how your organization is delivering new and innovative products.
Step 2: Assign story points to your sprints
If you’re using an agile development methodology, then assigning story points to your sprints will help you prepare and deliver against your goals and objectives while also serving as a time tracking tool for your R&D tax claim.
We recommend following a simple 15 point per-sprint agile methodology since it will give your team accurate time estimates that will substantiate your claim in the event of an audit.
Step 3: Leverage your code repository for version control
This step may be obvious to most, but it can’t be emphasized enough how important this tracking is to substantiating your tax claim. By simply referencing your ticket number in your Git commit, for instance, you are creating a trail that will stand up to the most rigorous audit.
Step 4: Allocate story points
Your team should allocate story points to quality assurance, project management, and resource management to increase the tax claim and reduce overhead costs. While these resources are not traditionally captured in platforms like Jira, creating a task associated with every sprint actually serves as technical evidence for your claim.
Step 5: Data integration
Integrate all this data with Boast. AI to automate the manual tasks (ie. time-tracking, automatic categorization of service tickets & epics to the associated projects, etc.)
After that, Boast AI takes it from there! Once you have your documentation and time tracking systems in working order, our team will work as an extension of yours to monitor for any and all activities that could be claimed through R&D tax credits.
By combining our AI-driven platform with years of experience (with many of us on the Boast AI team being founders ourselves), we can help you chart a course that maximizes your access to non-dilutive capital to extend your runway, with minimal effort. To learn more, schedule a call with the team today.