Steinbeis consultant provides support with project assessments and applications
In early 2020, new options became available to take advantage of government subsidies for research and development. In addition to funding through departmental research at federal ministries, an alternative approach opened up, making it possible to apply for so-called research allowances. The German government expects subsidies under the program to hit €5.6 billion per year. As with project subsidies, funding is not capped. Many companies take advantage of government subsidies, but far too few do so on a systematic basis and when they do, it’s usually only for specific reasons, says Steinbeis Entrepreneur Helmut Haimerl. Through his work at the Steinbeis Consulting Center for Technology Promotion and Project Financing, Haimerl helps companies make use of their funding entitlements.
Now that the maximum value of annual research allowances has been raised to €1 million – a policy introduced as part of the government’s economic stimulus package for 2020 to 2025 – for large companies in particular the new allowance represents a realistic alternative to project funding. This is because by exhausting the research allowance, companies are entitled to a €1 million tax credit for consecutive years.
The research tax incentive poses new challenges
Compared to project funding, the tax incentive on research funding is subject to lower requirements when it comes to the degree of innovation involved. “Lots of development projects that don’t meet the high standards of project funding do, nevertheless, fulfill the requirements of the research tax incentive,” emphasizes Haimerl. In addition, the incentive is not subject to an annual submission process. It runs for at least five years, always subject to the same conditions.
Ideally, reviewing the eligibility of development projects should be an ongoing process. If a project looks promising, an application can be submitted. In reality, however, things seem to be going differently: Until now, in many cases companies have only applied for subsidies on specific occasions when something encouraging crops up. Unfortunately, if firms only make use of the innovation funding in certain situations, this does not meet the requirement to submit potential funding claims on an ongoing and systematic basis. What are the challenges faced by companies when applying for subsidies? Haimerl names just a few (see also info box):
- Development work is distributed across different areas of a corporation; responsibilities are not clearly defined
- Funding opportunities are not systematically identified and selected
- Employees are relatively inexperienced in submitting applications and see funded projects as an extra burden
- There is a lack of expertise when it comes to comparing numbers in order to optimize the funding strategy
- Applying for subsidies is not enshrined in innovation processes
- Reporting procedures are not geared to making systematic use of subsidies
Turning a project into a systematic process
The companies that approach the Steinbeis Consulting Center are usually seeking consulting support with gaining certification for positive-looking projects. The question that then arises during preparatory discussions is whether consideration should also be given to other projects that might be eligible within the group of companies. Suddenly, a whole host of innovation initiatives have to be scrutinized to see if they are also eligible for funding. Also, applications have to be prepared.
For example, on one consulting project the Steinbeis experts had to review more than ten development projects from different areas within a group of companies and then apply for subsidies for each project that looked like a good candidate. Working with the project managers in different locations required rapid and uniform knowledge sharing. To lay a foundation for processing application documents in parallel, templates were used for project outlines and applications. Gaps in process understanding and experience were plugged and it was ensured that the right skills were in place. The Steinbeis Consulting Center provided the different stakeholders involved with a mixture of consulting support, training, and organizational observations.
If funding approvals are an important factor when it comes to priority-setting or deciding which development projects to pursue, it is important to submit applications quickly. If a company is short of internal human resources, or does not have access to the required competences, management of the subsidy process can be partially or fully outsourced to an external consultant. The only process that must remain within the company, even if this creates additional work, is the technical part. This allows a firm to keep structures lean while also benefiting from the experience of a consultant.
Efficient and successful thanks to systematic subsidy management
Haimerl is enthusiastic about the benefits of systematic subsidy management: “It allows companies to keep checking the eligibility of all development projects on an ongoing basis, not just in terms of research allowances but also project funding.” By adding structure to the subsidy process, companies avoid time-consuming applications for individual projects. As processes become more established and reliable, other workflows become more efficient and success rates improve. Employees no longer see funding applications as a burden or chore. It has also been proven that subsidies improve budgets for individual development projects, thus encouraging people to set more ambitious project targets.
The Six Steps of Subsidy Management
If you want to make systematic use of subsidy entitlements in a group of companies, you will need to take a number of things into account when setting up a subsidy management system:
1. Responsibilities: Developments take place decentrally within the corporation.
- Who is responsible for the scope of topics and finances at a group level?
- Who is given responsibility for operational aspects of project management?
2. Identification and selection: There are a variety of eligible and ineligible projects.
- Is there a uniform arrangement for identifying projects that look like strong candidates for funding?
- What criteria should be used when assessing eligibility for funding?
3. Submitting applications: Preparing applications so they are ready to be approved in terms of scope and formal aspects.
- Do employees have previous experience with subsidy applications?
- Do they have access to standard tools?
- Has it been ascertained whether project summaries meet uniform high standards?
4. Process: Subsidies should be requested for projects that have begun, are ongoing, or will happen in the future.
- Is the topic of funding an integral part of the innovation process?
- Have processes been clarified within the group of companies, with those responsible for content and, if applicable, with an external consultant?
5. Involvement: For some employees, the additional work created by submitting applications is a burden or chore.
- What skills do they need (for project management, but also within specialist departments)?
- Do they have access to somebody with the right background and knowledge?
6. Management control: Approved subsidies place new demands on management accounting mechanisms.
- Is everything in place to fulfill documentation requirements?
Helmut Haimerl (Author)
Steinbeis Consulting Center Technology Promotion & Project Financing (Munich)