Tracking time sucks. A vast majority of professionals do not rank time tracking as a core skill or something even remotely appealing. The question boils down to how much incentive does one need to track time? Will $1 do? How about $1M? I can assure you that lawyers and accountants who make over $1M/yr love to track every billable minute.
If you’re claiming SR&ED, you should be thinking more like a lawyer and an accountant when it comes to time tracking, as you can get hundreds of thousands, if not millions of dollars, in cash refunds from the Canada Revenue Agency (CRA) through SR&ED if you time track properly.
There are different reasons for tracking time for SR&ED purposes. If you’re a representative of the CRA, you want to ensure that the taxpayer is compliant with the SR&ED program rules and can justify the amount of time they claimed in their tax return. If you’re a developer or scientist, you want to show that you’re working on challenging problems, creating unique intellectual property, and focused on building solutions that are superior to existing solutions in the market. If you’re the founder or executive, you want to be able to track the SR&ED eligible time so you can plan your financing needs.
If you want to know the best way to track time, what the CRA expects and how to maximize your SR&ED claim, keep on reading.
Time Tracking Software
I think every consultant has developed SR&ED time tracking software. With the exception of very few industries, none of them work. The concept is good, but in reality, it rarely works because:
- Developers and engineers are not good at tracking time, so there are often gaps in the tracking
- Companies don’t want another system that needs to be integrated with existing systems
- Most people don’t know what SR&ED-eligible time is and what time does not qualify for SR&ED. Even if projects are being tracked, there may be components of the project that do and don’t qualify as eligible expenses
- For each new employee, there is additional training and effort to teach them how to effectively track time
- Some SR&ED time tracking systems only track SR&ED-eligible time, while others track both non-SR&ED and SR&ED time
- SR&ED consultants built the software to save them the time that is needed to build a cost matrix for applying to SR&ED, rather than focusing on how it can be of benefit to their clients
As of 2025, I am not aware of any widely used stand-alone SR&ED time tracking software.
What Counts as SR&ED Eligible Time?
There are two classifications of activities that qualify for SR&ED: direct R&D and supporting work. However, even before determining if it is direct or supporting work, we need to know if the activity qualifies for SR&ED. Check out this blog for a complete discussion of what work qualifies as SR&ED-eligible.
Direct R&D work includes activities executed by the technical staff or consultants. This can include research, experimentation, analysis or any other activity that is associated with addressing the technical uncertainty. Often, people with titles such as engineer or developer or scientist fall into this category. Generally, a person needs to be skilled in the area of research to qualify. For example, a person with no engineering experience or certification would most likely not qualify for direct work on a metal stress testing project. However, the person may be undertaking support work, which would qualify.
Common Pitfalls in Time Tracking for SR&ED
Mixing project/admin/non-eligible hours
Determining what administrative functions can be included in your SR&ED claim is a bit tricky. For instance, scheduling, budgeting, hiring and general project oversight do not qualify as SRE&D eligible work. However, administration and coordination directly in support of SR&ED do qualify. For example, coordinating experiments, organizing technical meetings, analyzing data or tracking SR&ED time should be included in an SR&ED claim.
Retroactive “guessing”
The reality is that not all companies are aware of the SR&ED program and are challenged to go back in time to determine what qualifies for SR&ED. The CRA will not look favourably on any company that recreates reality and presents it as fact. It is far better to be completely transparent, indicating what strategy has been used to estimate the time spent on a project. Guessing is a last resort. There needs to be some logic, some supporting evidence, and some consistent methodology for estimating time spent on SR&ED activities. Being able to articulate this and demonstrate a reasonable approach will assist in supporting the time claimed.
This could include totalling all GitHub commits for a developer throughout the year and identifying which are eligible for SR&ED. From there, you could calculate the % of the total that was SR&ED eligible and translate that into the percentage of that employee’s time that was SR&ED eligible. There has to be a clear metric or calculator that was used to show evidence of SR&ED eligible work and expenses.
Lack of supporting documentation
Considering that almost two-thirds of SR&ED claims are software development, and developers are notorious for not keeping track of their time accurately, it is no surprise that many companies lack documentation to support the time that they’re claiming. The CRA has different expectations for different types of experimentation and sizes of companies. For instance, a biotechnology company is expected to have detailed, accurate timekeeping records compared to a SaaS company. The SaaS company still needs to prove that they spend the stated time on SR&ED, but the expectations for the detail within the time tracking are much lower than for the biotech company.
Best Practices for Tracking SR&ED Time
Daily or Weekly Tracking
The bottom line is that the more granular the time tracking, the happier the CRA is. On one extreme is estimating the time for a full year (20% of their time for the year was spent on this project), and on the other is hourly time tracking. Oftentimes, it is simpler to track hourly, even if the data is entered once a day, or once a week. By the end of the week, an accurate representation of the time spent on each activity, if it qualifies for SR&ED or not, should be maintained.
Tools for Tracking Time
How to track time is a completely different story for every company. Some companies use tools that are built into their existing workflow software (such as Jira). Other companies use third-party applications that are specifically designed for time tracking and can integrate with their ERP. Other companies prefer spreadsheets or other forms of manually tracking time. As long as time is tracked contemporaneously, the CRA will accept whatever method you’ve chosen. The important thing is that you have the information about which employee, the amount of time they are spending on which task, and which project that task relates to (more info below).
Project Codes & Activity Descriptions
Assign a unique code to each SR&ED project. Codes should be meaningful and easily referenced.
1. Example project codes:
- SR2025-ML-01: AI/ML Model for Predictive Maintenance
- SR2025-BIO-02: Biodegradable Polymer Formulation
- SR2025-FIN-03: Real-Time Fraud Detection System
Tip: Use a consistent pattern, such as [SR Year]-[Area/Dept]-[Project #].
2. How to Assign Activities
Break down SR&ED-eligible work into specific, trackable activities. This aligns with SR&ED’s focus on scientific or technological uncertainty, systematic investigation, and advancement.
Example activity codes and descriptions:
Activity Code | Activity Description | SR&ED Phase | Example Notes |
LIT-REV | Literature Review/Background Research | Planning | Reviewing prior work, whitepapers, and patents |
HYP-DVL | Hypothesis Development | Planning | Formulating scientific/tech hypotheses |
EXP-DES | Experiment Design | Planning | Designing controlled tests/experiments |
DTA-ANL | Data Analysis | Execution | Analyzing results, identifying trends |
ALG-DEV | Algorithm Development | Execution | Designing new/novel algorithms |
PRB-SOL | Problem Solving | Execution | Troubleshooting, iterative testing |
DOC-RES | Documentation of Results | Documentation | Writing up findings, methods, and conclusions |
MEET-RVW | Technical Review/Meetings | Collaboration | Weekly SR&ED team sync on progress |
Example: Weekly SR&ED Timesheet Entry
Date | Project Code | Activity Code | Description | Hours |
2025-06-17 | SR2025-ML-01 | EXP-IMP | Implemented and tested new ML architecture | 4 |
2025-06-17 | SR2025-ML-01 | DTA-ANL | Analyzed validation results | 2 |
2025-06-18 | SR2025-ML-01 | PRB-SOL | Debugged data pipeline issues | 3 |
2025-06-18 | SR2025-ML-01 | DOC-RES | Documented test findings | 1 |
This information would be tracked for each technical employee.
Who Should Track Time?
Sometimes it is clear who is involved with an SR&ED project from the start, but often it is unknown if a project is eligible for SR&ED until after a challenge is encountered. Therefore, it is best for everyone associated with R&D to track time as accurately as possible. It is not only the staff directly involved with the R&D, but also supporting staff and managers. Everyone should track their time and note what activities they were involved in. By doing this, it is more likely to generate a larger SR&ED claim.
The CRA uses the term “Specified Employees” for people who own more than 10% of the company. These employees have two restrictions on the time that they can claim. The first is that they can claim no more than 5 times the Yearly Maximum Pensionable Earnings (YMPE), which is $71,300 in 2025. The second is that they can claim no more than 75% of their time for SR&ED. For some founders, this means that even though they are spending a vast majority of their time on SR&ED, they are limited to 75% of their time.
Backup Documentation
Saving documents as proof that a company is engaged in R&D and SR&ED activities is important. The documents can be meeting notes, calendars, code commits, or experiment logs. There can be photographs of whiteboards, artifacts of experiments or a multitude of other artifacts that can be retained as proof. Make certain you retain these documents until after the Notice of Assessment is issued for the fiscal year in which SR&ED is claimed. There is no harm in retaining the backup documents for longer, but the CRA will not ask for them at a later date.
Integrating SR&ED Time Tracking Into Your Workflow
The number one priority to encourage adoption is making time tracking easy. Easy means that it does not take considerable time, staff are informed and trained, and that tracking time is part of a daily routine.
For time tracking to be adopted, senior leadership must support and promote it. There must be a workplace culture that encourages and prioritizes SR&ED. Everyone should understand why time tracking is important and how much value the leadership places on time tracking. By sharing the full picture of how time tracking impacts the profitability of the company, it reinforces its importance.
Managers should be tasked with the responsibility of ensuring that time tracking is accurate and submitted on time. For instance, it is good practice that at the end of each week that the time tracking is up to date. Time tracking takes on a life of its own when you have to go back retrospectively and enter time for multiple weeks. The whole point is that time tracking is not an event but part of a daily routine.
Read this blog to learn more about incentivizing time tracking and the benefits that this can bring.
How to Prepare for an Audit
Preparing for an audit (or SR&ED review) can be daunting. Knowing what the CRA is looking for and coming with information that the CRA reviewers will understand and accept is important. There is a gold standard for time tracking, and a vast majority of companies don’t meet this standard. The CRA will ask the taxpayer to show that person X spent Y time in a particular month on a specific project. It is rare that the CRA will review every person, every project and every month. However, because you don’t know in advance what the CRA will focus on, be ready to demonstrate a realistic calculation and proof for any month.
Reviewers want to see reasonableness. Ideally, they want to see hour-by-hour time tracking, but if this is not available, they want to see that the amount of time claimed is within reason. The smaller the company, the less they expect sophisticated time tracking systems. The CRA also understands that different industries track time in different ways and work with companies to improve their SR&ED time tracking.
While it is not critical to gather the information that may be required in a review before submitting an SR&ED claim, it is prudent to know that you have the data if the CRA asks for it. Being able to collect and use the time tracking data to submit the claim is important; however, organizing it in a way that a CRA reviewer can consume it is not a good use of time. If the CRA ask, then spend the time to present the information. Learn more about how to win in a CRA review in this blog post.
FAQs and Common Scenarios
Time tracking for SR&ED is never as simple as clocking in and out. Every team and every project comes with unique wrinkles that need practical solutions. Below, I’ll answer some of the most frequent questions we get from founders, engineers, and finance leads. If you’re trying to do SR&ED right, you’ve likely run into one or all of these.
Q: How should we handle partial SR&ED/non-SR&ED days?
A: Here’s what works:
- Split your day by activity: If you spend 3 hours on SR&ED work and 5 hours on something else, log it that way. Don’t round up, and don’t fudge the numbers. CRA wants to see a credible, logical breakdown.
- Use simple categories: For each time entry, mark whether it’s SR&ED-eligible, partially eligible, or not eligible. Many companies use time-tracking software with dropdowns, but even a spreadsheet works if you’re consistent.
- Be consistent: Whatever method you use, stick to it. Consistency is what matters most if you’re ever audited.
Q: What about multiple overlapping projects?
A: If you’re juggling multiple projects at once, some SR&ED, some not, or maybe two that are both SR&ED but for different claims, accuracy is your friend.
- Tag each time entry: Always assign your tracked time to a specific project and activity. If you’re switching between Project Alpha (SR&ED) and Project Beta (commercial), make that clear in your logs.
- Avoid double-counting: You can’t claim the same hour for two projects. If you’re working on a shared technical challenge, note which project is the primary beneficiary.
- Document context: Even a quick sentence about what you did and why it’s relevant to SR&ED can save you hours (and thousands of dollars) in the future if reviewed.
Q: How should we onboard new employees for SR&ED tracking?
A: Bringing new team members up to speed is one of the most overlooked parts of SR&ED compliance. The sooner you get them tracking their time properly, the easier your life will be come tax season.
- On Day 1, set expectations: Make SR&ED time tracking part of your onboarding checklist. Explain what it is, why it matters, and how it’s done at your company.
- Training matters: Don’t assume people know what “SR&ED-eligible work” means. Run a 15-minute session with real examples: “This is claimable, this isn’t.” The more concrete, the better.
- Provide tools and templates: Give them access to whatever time-tracking system you use, pre-populated with categories or projects. Show them how to log time as they go, not weeks later.
- Regular reminders: It’s easy for new hires to forget in the whirlwind of a new job. Set up automated reminders or check-ins, especially for the first month.
Summary
If maximizing SR&ED claims and defending them in a CRA SR&ED review is important to your busines (which it should be), then time tracking is critical. Finding an efficient, precise and simple method is the key to adoption and compliance.
If you feel that your time tracking is not up to snuff, we’re here to help. We have training programs, are able to analyze your current business time tracking needs and recommend solutions which fit them. Our team has seen all shapes and sizes of time tracking, so if you have any questions, we’d be happy to answer them. Reach out to us at contact@growwise.ai.
