Vineyard Research
In all commercial endeavors, no matter the industry, time is of the essence. Being quicker to market and one step ahead of the competition is necessary in establishing one’s market share and relative success.
A recent Harvard Business Review article explored studies conducted on subjects in terms of deadline constraints and procrastination, “Why we procrastinate when we have long deadlines,” by Meng Zhu. Interestingly, most people assume that longer deadlines imply an increased difficulty to the task, thus more time and resources are committed to its completion, and significantly more procrastination and failure to finish the task occur. As well, findings indicate that when a budget is involved, setting shorter project deadlines will tend to decrease related costs.
Time is of the essence is a common contract clause that simply aims to keep the two parties on track, to timely task completion. In the Scientific Research & Experimental Development (SR&ED) realm, ‘time is of the essence’ is paramount: costs related to SR&ED research and experimentation, such as salaries, materials and contractors, can be claimed up to eighteen months prior, a generous feature of this government tax incentive program, but prone to difficulty if the claimant needs to rely on their memory of activities from a year and a half ago.
Ideally, any eligible experimentation conducted in your vineyard or cellar will be recorded in real-time, as it happens, when your memory of the task is fresh in your head and your dialectical method is most pronounced. The questions to ask on at least a weekly basis are: what are our technological or scientific obstacles? How did we attempt to overcome them? What new technological knowledge did we gain? We recommend you set short deadlines to capture this content.
For example, did your innovative pruning techniques result in measurable yield? Did you gain new knowledge in your attempts at precision viticulture? Did your attempts to reduce smoke taint fail or flourish? Did the use of puncheons over traditional barrels result in desired sensory profiles? Any new knowledge gained through a systematic experimental process is the essence of SR&ED. And, essentially, innovation equals dollars in the bank, thanks to SR&ED.
In documenting innovative work, heed the advice of the authors of the Harvard Business Review article: assign simple tasks with the ‘illusion of urgency.’ The authors state: “Short deadlines on urgent tasks elicit attention. Those tasked with the assignment are more likely to complete it, less likely to procrastinate on it, and less likely to spend superfluous money on it than if they were given the same task with a less-urgent deadline.”
Thus, setting a weekly deadline to record new knowledge gained will result in 52 iterations of evidence in support of your SR&ED claim, and better success in having the claim accepted as filed by the CRA. Certainly, keeping the long-term goal of claim acceptance in mind (and money in the bank) will assist in compelling you and your vineyard and cellar staff to record measures of success and failure accurately and often.
So, if this is your inaugural attempt at claiming SR&ED, think back through your year and summarize any challenges and new knowledge gained as best you can. Then, when your new fiscal year is about to begin, start documenting your research and experimentation contemporaneously. Use pen and paper, an Excel worksheet or a time-keeping app. Capture innovation in the way that feels most convenient and practical. Think systematically and follow the scientific method and the progression of thesis, antithesis and synthesis. Record your results, conclusions and new hypotheses often, and always note units of measurement. Explain what worked and what didn’t. Note that failure still qualifies as SR&ED, as now you know what not to do. Set short deadlines and follow through.
In a 2009 article in the European Journal of Social Psychology, “How are habits formed: modelling habit formation in the real world,” the authors conclude that it takes a minimum of two months for a new task to become habitual, and that “missing one opportunity to perform the behaviour did not materially affect the habit formation process. With repetition of a behaviour in a consistent context, automaticity increases...” As this article suggests, it may take a while to establish your new SR&ED documentation process, but perseverance will pay off and your SR&ED time-tracking efforts will eventually become commonplace. RSG Revenue Services Group is here to help you through the SR&ED process. Your business – and most importantly your bottom line – will benefit.
Carla Elm, VP RSG