Generally when companies are looking for their SR&ED eligible projects, there is a tendency to just look within the 4 walls of their own facilities. This of course is the most obvious place to look and probably the one that will drive the largest benefit, but very often in business it is also about finding smaller opportunities that can make a significant positive difference.

So where else might a company look to find benefits from the SR&ED tax credit program? Well, how about all those activities associated with your business that happen outside of your plant and that can have a huge impact on your success; specifically those within your company's Supply Chain !!

First of all, what do we mean by Supply Chain? Well taking from the Canadian Supply Chain Sector Council's web page, the first part of the definition reads: Definitions of a "supply chain" virtually universally encompass the following three functions: i) supply of materials to a manufacturer; ii) the manufacturing process and, iii) the distribution of finished goods through a network of distributors and retailers to a final customer. Companies involved in various stages of this process are linked to each other through a supply chain.

So what is there, within your supply chain that could benefit you by taking advantage of the SR&ED tax credit program? I think the best way to think about this is that companies do not work in isolation of their suppliers and customers and what's important is, "what is it they are doing to ensure their own success and what is it they are doing that is going to be beneficial to you"? At the 30,000 ft. level, the easy answer is, if they are not a strong, competitive, viable businesses this is going to negatively affect you. Conversely if they are strong, competitive, and viable they are probably that way because they are innovative with their products, processes and services they provide. The list of benefits to you can be significant; here are a few examples just to demonstrate.

If we break the supply chain into 3 segments, we would look at the upstream supply of materials, components and services that support your business, next is the activity within your 4 walls that transform those items through value added process to the point of a sellable product and finally the down stream activities which occur in your customers facilities.

Since you are hopefully already taking advantage of those SR&ED eligible activities within you own facilities, let's look at the other two, the supply side and the customer side .

 

Benefits to you of SR&ED at your Suppliers.

A direct $$ benefit can be those activities you are paying your supplies for, those related to product or process developments where you will own the intellectual rights.

Another direct benefit, although not from a SR&ED $$ standpoint, might be activities your suppliers are doing that will provide you with a superior raw material, component or service that will translate into a competitive advantage for your product.

In a world of constant pricing pressures, when you are looking for lower cost material, components or services, your suppliers better be the type that are being innovative to make sure they can contribute to that end successfully and be in a position to pass on cost reductions without putting themselves in financial distress because they can't support the necessary lower costs.

Service from a Quality and Delivery standpoint are critical. There is nothing that can bring a business to its knees faster than a supplier that is shipping you defective product or is missing delivery commitments. Again this can have a direct impact on your business and again provide examples of where constant innovation at your suppliers is essential.

So if you ask your suppliers whether they are claiming for SR&ED and the answer is no, a red flag should go up; they are either not doing innovating things or they are just not claiming. Both are not good answers and can have a negative affect on you.

 

How about SR&ED at your customers?

If your customers are not driving innovation, and they are a supplier to someone else, how long are they going to survive and be a good paying customer for your products??

Again if they are not taking advantage of the SR&ED program, they are putting themselves at a disadvantage vs their competition and putting you at risk.

 

So how do you ensure your suppliers and customers are being innovative and taking advantage of the SR&ED Tax Credit; ask them!!  Through your purchasing ask your suppliers and through your Sales ask your customers. If they are not claiming ask them WHY and if they are ask them if they are taking full advantage and in either case if they need help, tell them they can always ask for assistance from EMC's SR&ED team.