Precision-Crafted Tax Savings: R&D Credits in the Machining Industry

If you are a contract manufacturer working with new jobs or developing your own new product or process, you likely have processes that would qualify for the R&D tax credit. The process of uncovering these hidden expenses is similar, whether intending to improve a product or a process. Here are some areas where R&D expenses often hide in a machine shop:

• Sales and Quoting: To price a project, salespeople and cost estimators must understand the unique part requirements, including the machinability of the raw material, quantity, size and tolerance, along with your in-house capabilities.
• Design: When designing a new part or programming tool paths for your shop, additional considerations include the properties of the material being machined, tooling and the order of tools used to create the desired shape.
• Trial Production and Proof of Concept: Operators must prepare the CNC machine before running the program. Dry running the program allows for identification of potential errors and fixing mistakes before a crash can occur.
• Quality Approval: CNC machining requires attention to detail based on the type of tolerances being held. Having a documented procedure that includes quality approval from the QA lab in larger operations or having a second operator in smaller shops verifying parts are to print is critical to producing consistent acceptable products.
• Shipping and Package Design: Part requirements are much stricter and held to a tighter tolerance in the machining industry, which means the potential for damage to parts is more likely. Custom packaging, therefore, is often needed to prevent damage.