It’s OK to dream.
Take a moment and imagine how you could invest a sudden windfall for your manufacturing business. Technology. New equipment. Critical staff. COVID-19-related expenses.
It may not be such a dream after all. In fact, thousands of businesses are reducing their tax liability and reinvesting dollars that would’ve been paid in taxes. It’s all about properly claiming R&D Tax Credits.
Think of it as instant capital. An opportunity to sustain growth, remain competitive, and increase profitability. This article explores various ways manufacturers are investing their R&D Tax Credits to achieve their goals. It’s not a dream; it’s happening.
1. Buy New Equipment
Critical equipment breakdowns are costly to manufacturers. In fact, 98% of organizations agree that downtime exceeding 1 hour or more costs $100,000+, according to Information Technology Intelligence Consulting. That staggering number includes equipment repairs, downtime, and reduced productivity. It’s vital that manufacturers’ equipment functions properly.
The right equipment can increase capacity, reduce constraints, streamline processes, or eliminate costly slowdown areas in your value stream. If overdue maintenance is needed or a new piece of equipment has to be purchased, R&D Tax Credits can cover either a monthly payment or perhaps an outright purchase. An investment in better, faster equipment is usually a smart move.
2. Hire Critical Staff
It’s a unique economic environment.
In both the best and worst of times, it seems most manufacturers struggle to fill key open positions. As a result, companies can be forced to turn down business. According to the National Association of Manufacturers, the inability to attract and retain the best workers remains a top concern.
When your business identifies the need for skilled, experienced workers, the R&D Tax Credit Savings can help ease the financial burden of bringing them on. Offering competitive salaries to attract the right people and make your staff stronger can all be done with the assistance of the R&D Tax Credit.
3. Funding Ongoing Operations
Speaking of unique times, the challenges manufacturers face today is unlike anything most of us have ever seen. Considering new equipment or new employees may sound absurd for many companies, especially if you missed out or don’t qualify for federal Small Business Administration (SBA) loans.
R&D Tax Credits savings can be used as working capital to maintain business operations. So, instead of scaling down and missing out on business opportunities, you can fund the things you do best.
4. Cover COVID-19-Related Costs
The coronavirus has stretched supply chains and forced production pivots across all industries. Manufacturers are navigating uncharted territory, and many face unforeseen challenges and costs related to COVID-19.
Especially in the middle of a global pandemic, it’s important to spend wisely. Money from R&D Tax Credits savings can be used as emergency funding, helping you navigate your business through downturns and other unexpected costs.
5. Upskill Workers
In early 2020, manufacturers were planning to spend $26.2 billion on training for new and existing employees to combat the tight labor market, according to the Manufacturing Institute. Yes, the global pandemic has slowed this spending, but “upskilling” a current workforce is still a smart way to ensure there’s a pipeline of future talent.
As workers with decades of experience and a huge depth of knowledge retire, it leaves a skills gap with the next generation. Taking time (and spending money) to upskill your current workforce tightens the gap, without you having to overspend to acquire new talent.
Plus, when your current staff sees their employer investing in training and retaining workers, it’s clear they’re the company’s greatest resource.
Money from R&D Tax Credits savings is a great source of capital without taking away from other important areas. Tightening the skills gap is nothing new, but it’s importance does seem to be increasing.
6. Invest In Technology
Roughly 63% of manufacturers believe that applying Internet of Things (IoT) to products will increase profitability over the next five years, according to Forbes. We think that’s low! From software to predictive maintenance to self-optimizing production, manufacturers are already leveraging new technology in so many ways.
Consider just one example. New technology simplifies supply chain management, which realizes many benefits:
• More efficient business operations
• Reduction of operational costs
• More visibility and control over inventory
• Improved customer satisfaction and retention
Now, consider data collection and real-time insights, automated inventory management, assistive technologies (augmented reality and virtual reality), mobile robots, ERP systems that streamline processes, etc.
To stay Industry 4.0 competitive, manufacturers must embrace emerging technologies, which requires an investment. Yes, some software (an ERP, for instance) can be expensive. But using funds from R&D Tax Credits savings relieves the sting while elevating your business to the next level.
R&D Tax Credits can turn dreams into reality for manufacturers that qualify. The hard part may be choosing how to improve! Invest in the people, equipment, technology, and/or operations you need to grow, remain competitive, and ultimately drive profitability. Contact our team today for an assessment!