The new year always brings with it a range of new business opportunities (and a smart new desk calendar to match).

The start of 2022 provides business owners and R&D professionals the chance to reflect on their current R&D strategies and commit to addressing weaknesses in the year ahead.

Whether you’re a fresh start-up yet to explore the potential of research and development or you’re an experienced R&D manager on the hunt for new opportunities, there’s always room for improvement.

With that in mind, here are 4 New Year’s resolutions your business should make today to increase your capacity for innovation and maximise your R&D tax credit claims.

Foster a culture of R&D

Through the UK Government’s SME R&D tax credit scheme, eligible businesses are able to claim back up to 33p for every £1 spent on qualifying activity.

This means R&D can boast a wealth of benefits for your business - meaning building research and development into your business’s culture can often pay dividends.

When most businesses recognise the financial perks of subsidised R&D, many look for quick wins in the hope of an immediate increase in cash flow. However, a far more effective and sustainable approach is to build a culture of R&D from the ground up.

To do this, you need to focus on two elements: education and recruitment. If necessary, take the time to educate both yourself and your wider team on the fundamentals of the R&D tax credit incentive.

Ensuring everyone involved is familiar with the basics will increase the likelihood of R&D being factored into day-to-day decision making - optimising your innovation processes and maximising your project scope.

Alongside education, look to foster a culture of R&D through purposeful recruitment. Start by filling any gaps in your technical workforce to strengthen your claims, such as hiring competent professionals and R&D specialists.

Research and development is all about placing your business at the forefront of industry evolution, so look to source new skills, fresh perspectives and a diverse workforce, too. This enables your business to take the most comprehensive and competitive approach to creativity and problem-solving in the New Year.

Manage your pipeline more effectively

Research and development is the foundation of your company’s growth - making optimised R&D pipeline management vital to your business.

While most businesses who pursue R&D projects will have a general idea of their roadmap for the year ahead, effective pipeline management relies on far more than good organisation. An optimised R&D pipeline is one that’s driven by purposeful strategy.

Achieving this is all about identifying a balance of risk and reward. Possibilities for innovation are endless, but your company’s resources aren’t - this requires you to weigh up short-term gains against long-term uncertainties and the scope for profit.

Take the time to understand the uncertainties you may face throughout your pipeline to ensure your processes are optimised to overcome barriers. This will help you develop an R&D strategy that remains focused on three goals: alignment, balance and maximum return.

Developing logical KPIs will help you to establish a more considered approach to picking and prioritising projects. It will also provide an objective benchmark for measurement and analysis.

Look to assess, analyse and measure throughout your R&D pipeline. This will help you understand and communicate R&D’s value contribution at every stage, meaning you’ll be able to be more flexible and reactive when necessary.

This all amounts to an efficient and strategic approach to R&D pipeline management, ensuring a good flow of research and development opportunities throughout the coming year.

Be more proactive

While many of our New Year’s resolutions centre on being more active in the year ahead, instead, we recommend business owners and R&D professionals focus on being more proactive.

To fully take advantage of the UK’s R&D tax credit incentives, it pays to go looking for new opportunities. Being more proactive in identifying R&D opportunities in 2022 can help you get ahead of your competitors, positioning your business at the forefront of industry innovation.

So, start by ensuring you’re aware of your eligibility, asking yourself whether you’re:

• Operating in a specialist or niche market
• Employing specialist or technical staff
• Operating in a regulated industry
• Facing scientific or technical uncertainty 

Projects that meet these criteria may qualify for financial subsidisation through an R&D tax credit incentive - including what you may consider ‘run of the mill’ day-to-day activity.

For many businesses, this has the potential to significantly increase cash flow, meaning you should always be aware of how and when to source new research and development avenues.

Develop a proactive strategy through an approach that aligns R&D with corporate priorities and wider business growth. For example, familiarise yourself with common research and development roadblocks, such as a lack of accountability metrics or cross-departmental understanding, and strive to find solutions.

Use your solutions to inspire a strategy that’s driven by three fundamental questions:

1. What will I deliver?
2. What do I need to deliver it?
3. How will I deliver it?

By pairing this strategy with a proactive approach to accounting (more on that below), your business can build a better relationship with R&D.

With an increased governmental focus on R&D in the wake of the pandemic, being proactive could be more valuable than ever this coming year.

Keep better records

Don’t fall short when it comes to maximising your R&D tax credit claims in 2022.

Poor financial record keeping can be the downfall of an R&D claims. At best, it can slow HMRC down, meaning you’ll have to wait longer to receive a payout. At worst, it can negatively impact how much you receive.

With this in mind, it’s obvious why this resolution is so important to your business. So, look to keep thorough financial records of qualifying R&D expenditure, including costs associated with:

• ​​Staff: the members of your workforce on the payroll
• EPWs: externally provided workers from a third-party staff provider or a hired freelancer
• Subcontracts: outsourcing of qualifying R&D projects could be eligible for up to 65% of relief under an SME R&D tax credit claim
• Consumables: materials consumed or transformed during qualifying activity

While there are no set rules on what should be recorded, the HMRC’s Corporate Intangibles Research and Development Manual offers insight into its general R&D review process. Look to make this process as easy as possible by detailing as much as you can, ensuring costs can be easily tracked, cross-referenced and authenticated.

There’s no one-size-fits-all approach to your financial record keeping - it all depends on what works best for your business. The most important thing is that you get into the habit of recording spending accurately, clearly and frequently this year.

Increase your project scope and maximise your claims this new year by committing to conducting research and development the right way. By embracing these four New Year’s resolutions, your business will have an organic, purposeful, sustainable and optimised approach to R&D that’s sure to help forward your business and increase its cash flow.

Make sure you’re capitalising on all R&D has to offer your business in 2022 and beyond. For a helping hand, get in touch with Lumo to learn more about how we help businesses unlock their R&D potential.