Document your SR&ED now

To claim tax credits for an SR&ED project, the Canada Revenue Agency (CRA) now requires contemporaneous documentation of the activities claimed. Document your SR&ED, how do we do that?

Document HOW?

It requires a new business discipline, a new system to document regularly because nobody will remember in detail what happened 12 or 18 months ago. When you start a new development project, immediately think about documenting it. How will you measure the work done? You will then find ways to incorporate these measures into your way of doing things. For example :

• Mark these activities in your project or time sheet management software
• Save the information in a separate directory for SR&ED
• Save important emails in PDF format
• Create a red folder marked R&D on your desktop where you discard your dated handwritten notes, hard copies of websites, blogs and other sites visited to understand and evaluate the technology, tools, alternatives, etc.
• Prepare birth certificates and prepare tracking documents to show the progress of your projects that can be claimed as SR&ED
• Initiate a logbook to record the progress of each project
• Follow the expenses
• Use simple communication tools and collaborative documentation, such as a Wiki, or voice recordings to build your virtual “collage”, on the network or even on the Web, and to:
• Centralize the supporting information
• Begin preliminary drafting of your technical projects.
• Motivate some of your resources with the electronic format, often more effective.

Document WHAT?

Review the information gathered at least two or three times during the year, to ensure the information is complete, dated, and related to key project events.

Concepts

Document initial concept discussions and initial documents explaining the requirements – why you felt the need to experiment with technical improvements in the first place. Photos, videos, prototypes or wrong codes can be worth gold to demonstrate significant changes and improvements to the experimental design. If you can demonstrate high-level needs, you will typically find that most companies generate a lot of detailed documentation – the trick is to trace the evidence of “unnecessary results of detailed failure” before they are thrown away.

Issues

Likewise, high-level issues are often the most difficult to document – the issue is often located between a learning attempt or a trial-and-error focus. Talk to your designers and analysts, have them describe their conceptual approach and the corresponding dates when they were always considered.

Typically, when something is missing, send an e-mail asking for a summary confirmation (eg a bulleted list rather than a text) of the conceptual alternatives considered in the early stages of development. Similarly, you can record an interview where you will be told the details of complex situations or concepts. Quantified technical specifications of specific targets that were known or unknown are important for defining and demonstrating technological issues.

Learning appears in the complexity of the details told by the people who did the work – managers are often too far away from the problems and they over-simplify the difficulties sometimes, for example to facilitate discussion. This can make the claim very difficult to defend. Go to the source, talk to those who did the detailed work, find out what their options were and what they were looking for. Build a global and close vision at a time. Too generic quotes lack credibility. Get specific, quantified or qualified conclusions.

Thoughts

Document your thought processes before experimentation. This is critical because if the problem can not be defined before the experiment, then the cost could be denied. Your need to experiment may be due to lack of time or resources. The experimental approach is perhaps the best method for the situation, although not the only one. However, be sure to draw sound conclusions after the experiment. For example, if you will not redo this design or experimentation, it may be a very significant lesson. Emphasis on the evolution of the design of the experiment can be exceptionally powerful.

Objectives

Relate to your objectives.

Similarly, if you can not show a change in your approach or direction, you may be in the process of developing a known technique. So be sure to keep the relationships to the original purpose in the documentation. “Tuning” may be a necessary step rather than actual “learning” for the future. Thus, presenting the evolution of the design of the experiment is often a critical and essential perspective for some start-up situations.

And how do you document your SR&ED projects? Do you have any tips to share? How do you make sure the right information is kept throughout the year?

How do you document during the course of your SR&ED projects? Do you have any tips? ways of doing things or ideas to share about it? How did the CRA respond to your documentation mechanisms?

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