It’s a common belief that great companies invest in innovation. However, the speed at which technological advancement is moving highlights the mounting pressure on companies from global governments when it comes to R&D. This has led to many experts predicting a sizeable increase in R&D activity in the next three years.
On the other hand, we’ve found that there is mounting complacency among some businesses and that such inaction may result in some firms being ill-prepared for this upturn in R&D.
With the need for R&D on the rise, it therefore lies with CFOs to make sure that everything is financially viable. Development costs for R&D purposes can often extend beyond their allocated budget and spiral out of control. Let’s analyse it further:
The challenges
Challenges can come from all sides when it comes to R&D. You may discover that an external contractor is a bad fit; you might make a weak R&D tax claim to HMRC that leads to an elongated challenge; or it may even be budget mismanagement by development teams that causes the pain.
Do you want to hear a frightening statistic? Harvard Business Review, during a survey carried out in the 2010s, found out that one in six IT projects have a cost overrun of 200%. So don’t feel like you’re alone when it comes to budget issues.
The truth is that such financial and budgetary headaches can sometimes feel like they’ve come out of nowhere. Of course, there may be unforeseen costs or deadlines may be shortened or extended due to things out of your control. What matters is taking steps to foresee or mitigate these costs as best you can before their impact worsens.
Here are some solutions you may want to look into that’ll help mitigate costs:
The solutions
Visibility and communication
The benefits of real-time visibility cannot be underestimated, especially when executives hate the words: “I’ll get back to you.” Employing software that can track and provide live data or task progress to those involved in a project can help you and your team to mitigate any issues that may lead to increased spending on certain areas. Not only is this visibility important but, more often than not, you’ll have a record of what happened and at what point in the development cycle it happened, allowing for better process alignment in the future.
Further to this, visibility of budget and cost can help your team make informed decisions when it comes to deciding when and where to spend money.
However, visibility means nothing without proper communication. Make sure that all of your teams are communicating with one another in order to facilitate reduced friction during development.
Quality assurance
Another helpful way to mitigate costs is to involve your QA team from the very start of the development cycle. Errors and bugs often accumulate during the design phase and begin to spread during development. Involving your QA team during these initial stages can help to identify issues prior to development, and help to prevent any costs for redesign which come along mid-project. Reworking requires additional funds so make sure you’re off to a good start even before development begins.
Accountability
The question of accountability can often bring a lot of internal politics to light within your business. When the management consulting firm Mckinsey and Company looked into the cost-cutting program at a multinational high-tech company, they found assigning accountability in the right place actually leads to better cost management. Mckinsey also found that when the accountability lay with those who were closest to the decisions, it allowed for costs to be managed appropriately, as they were able to use their expertise to make informed decisions about where to spend and where not to.
How MSC can help
Making a well-structured R&D tax credit claim
CFOs should begin to consider how their company will react at a financial level to the increased demand for innovation. With R&D budgets predicted to rise over the coming years, CFOs need to make sure that they’re maximising their R&D claims so that they get the best value for their company. However, the process can become complex and lengthy if the claim is challenged by HMRC. Now that these challenges are on the rise, the involvement of a competent specialist is all the more vital.
MSC is fortunate to have a low challenge rating with the claims we submit. This is due to our employment of many former HMRC employees, alongside experts who know how to properly interact with and satisfy one of the largest financial institutions in the country. Making a well thought out and examined claim can not only save your company a good deal of money, it can also save you a good deal of time.
If you want to be certain you’re claiming for all the eligible parts of your R&D spend and that you’re staying within the boundaries outlined by HMRC, talk to us on 0114 230 8401 or email [email protected]
{{cta(‘3b0ca79c-a71a-4265-87cc-a208b41bbc34’)}}
