How can you boost your tech business’s cash flow with government incentives?
When you launch a startup, it’s natural to think being cash strapped comes with a territory. After all, you’ve likely seen plenty of movies and heard stories about the endless struggles of entrepreneurs who endure years of hard work before making a single penny.
However, our experience in the real world proves this doesn’t always need to be the case.
Although it’s reasonable to expect long hours as you invest all your time and energy into getting your venture off the ground, there are smart steps you can take to minimise the time it takes to reach a cash flow positive state.
And while you may be consumed by the technical activities of your business (where your passion lies), partnering with an advisor who can help you identify and take these smart steps can make all the difference.
One way an advisor may do this is by leveraging all available tax incentives and grants. Some of these are particularly valuable to technology companies and can provide a much needed cash injection into your business.
Why use the R&D tax incentive
One of the best tax incentives available to tech startups is the research and development (R&D) tax incentive. It allows you to claim back a portion of the money spent on R&D – which for a startup is likely to be significant.
To claim the R&D tax incentive, you must be undertaking eligible R&D activities.
For a tech company, this could include money spent on:
- coding algorithms for experiments
- collating data samples
- exploring and manipulating large datasets
The purpose of the R&D tax incentive is to support and encourage local innovation, so eligible activities must meet certain legislative criteria.
We work with many tech startups to assist with R&D tax claims, and our people have specialist expertise in software development and technology so they understand the nature of your business and can make detailed and accurate assessments.
At least half of our startup clients run software-based companies, which is still an evolving area in the R&D tax space. There are definitely opportunities for claims, which is why it’s important to work with an R&D expert who stays up to date with the latest developments.
For businesses with eligible activities, R&D tax incentives are available on an annual basis. There’s no limit to how long you can claim for, and there are even financiers who will fund your expenditure in advance so you can access the cash faster. For this, RSM can provide a letter of confirmation that verifies how much your business is eligible to receive.
Why SHOULD YOU care about R&D government grants?
There are also numerous government grants available to startups which can be highly beneficial for new tech ventures.
For example, in NSW there’s a fantastic $25,000 minimum viable product grant available to businesses that can show they have approved project costs of $50,000.
Government grants are often highly competitive with several hoops to jump through before you can successfully apply. Often, your business structure will affect eligibility so this is another factor you will want to discuss with your advisor.
Some grants are seasonal, while others are year-round. Some are best applied for when you’re in the very early stages, while others are designed for businesses that have been operating for a few years.
Regardless of which stage your business is at, speak with your advisor and ask for their help to:
- identify appropriate grants
- get your books in order
- put together a strong application
Don’t ignore opportunities to boost your bottom line
Failing to maximise all available tax incentives is equal to throwing your money away. Where you can legitimately claim a refund on R&D activities and secure grant funding, you have an opportunity to propel your cash flow and scale faster.
Most importantly, you will be proving to future investors that you are as serious about making money as they are.
How can RSM help?
To find out how RSM’s financial advisors and R&D tax specialists can support your business in boosting cash flow, contact your local RSM office today.