How to Choose the Right SR&ED Consulting Firm
Choosing a professional, ethical and experienced SR&ED firm has become increasingly important in the Canadian R&D landscape. The Canada Revenue Agency is continually raising the standard of expectation in claims, hiring additional staff reviewers and making improvements to the SR&ED claim form.
Since the CRA is expecting better prepared SR&ED claims, it’s no surprise that they are also reviewing more claims and denying more claims based on improper documentation.
If you are considering hiring an accounting firm or consultant to handle your SR&ED claim preparation, you should know that there are substantial differences between the choices you have available. Read more about hiring a SRED consultant vs accountant on our blog!
Hiring a “big 4” audit firm
The big 4 audit firms are an obvious consideration for many companies looking for consulting support. For SR&ED claims however, you should be aware that big 4 audit firms do not handle these claims as a primary business line and that the work could be assigned to junior level consultants. Due to large overhead costs, it’s also a reality with big 4 audit firms that consultants are under pressure to complete their work quickly. The cumulative effect is that the big 4 audit firms often don’t take the time to scrutinize all SR&ED opportunities that may exist.
In-house accounting team or an accounting firm
Having your accounting team or using the accounting firm who prepares your taxes is another consideration for SR&ED claim preparation. Here the major shortcoming is depth of technical expertise. SR&ED claim preparation is 15% accounting and 85% technical documentation , resulting in accountants missing possible claims and not documenting the technical components critical for a successful claim.
Hiring an SR&ED consulting firm
A specialized SR&ED consulting firm is the best choice in terms of maximizing your claim and ensuring that your claim is not rejected. Since the SR&ED program is a scientific program, it is critical to your claim that the technical aspects of your work are documented in a technical narrative. A technical narrative that does not focus on the correct details of the project is the number one reason that SR&ED claims are rejected.
An SR&ED consultant understands your technological advancement from a technical perspective and is able to communicate the process effectively. SR&ED consultants make it their complete focus to deal with SR&ED claims, know the requirements inside and out and have both finance and technical backgrounds.
It’s important however, to be aware that all SR&ED firms are not the same.
For example, some SR&ED firms contract out work to technical writers. Lower paid technical writers may not be aware of all of the CRA’s SR&ED claim guidelines and can take the approach of adding in all detail instead of just relevant details. This can lead to claim reviews and claim rejections.
Another precaution to take when hiring an SR&ED consulting firm is to make sure that the consultant assigned to your case has the right technical expertise to match your business. Some SR&ED consulting firms have a limited number of consultants who may be very good in certain industries, but not necessarily in yours.
How consultants are paid by the firm also may be relevant to your choice of SR&ED consulting firm. Typically consultants paid based on the results of their work are more engaged and motivated to produce quality work. Some SR&ED consulting firms hire salaried employees who are less motivated to put in the extra effort to maximize your claim.
When hiring an SR&ED consulting firm, it’s best to ask the following 5 key questions:
- Who will be working on the file and what is their background and experience?
- How many claims do you file each year and how many are reviewed?
- Are your SR&ED claims staff salaried employees or working within a revenue sharing model?
- What is your tolerance for claims risk, i.e. are claims prepared conservatively or do they push the limits of what is allowed under the legislation?
- What is your client retention rate?
At Enhanced Capital Recovery, we are happy to answer all of your questions. Please contact us today for a free, no risk consultation to see how we can serve you.