Debitoor Dictionary

Accounting terms explained in a simple way

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Research and Development (R&D) - What is Research and Development?

Research and Development (R&D) is efforts a company puts into innovating and improving their current products, or what it would take to develop and introduce new products to market.

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Research and development does not focus on immediate profits, and in general is incredibly expensive to undertake for a company. It does, however, go a long way towards long term profits over a greater period of time.

What exactly does Research and Development involve?

Research and Development is a costly and rather long process from beginning to end, and something to be done after serious consideration. There are two main approaches to Research and Development - a department comprised of engineers who are researching to develop the products, or a department of industrial scientists whose methods are more focused on applied research.

In the first case, this is usually the beginning of a Research and Development process, with the idea being to get a more rounded view of a particular aspect of a technology or concept. Applied research is more detailed and therefore tends to go on for longer meaning it is more expensive to conduct.

As an example of current technological R&D, recently there have been mobile phones being released with under-screen fingerprint scanners - the first being Huawei, along with Samsung who are apparently set to include it in their next flagship device. No doubt other manufacturers have also been looking at ways to achieve the same.

The main reason for the technology being included is because this will reduce the amount of bezel needed around the device, meaning a larger screen whilst maintaining the original dimensions- continuing the trend of minituarising technology that has been going on for decades.

So what exactly does Research and Development achieve?

As stated above, Research and Development isn't something that is done for immediate profits. On the contrary, there must be a careful balance and an assessment of risk vs profits. This is due to the fact that companies pour millions (or even billions) of pounds into the process, and a decision on whether it is worthwhile to pursue has to be made weighing up the pros and cons before moving forward.

With that said, however, successful Research and Development can pay off hugely when new products and technologies come to market. It also helps bring the industry forward as a whole and create healthy competition.

Aside from improving technologies, other end results of R&D could be in the form of new patents for these technologies, that give the company a competitive advantage over others in the industry or at least make it harder (in the form of [barriers to entry(/dictionary/barriers-to-entry)) for their competitors to match (such as the Samsung example earlier).

Research and Development normally is never entirely profit focused (although it can be a big part). Depending on industry (especially medicine), R&D is done to solve how to fight various diseases and illnesses for which we do not yet have a cure, or to simply improve on existing medicine e.g. better pain killers in an aim to ultimately treat illnesses and ailments more effectively.

It can be said that the main achievement of R&D is for the bigger picture, a particular vision, and moving things forward. It may be part of wider goals that a company has set itself 5-7 years from now- or simply the beginnings of something that they want to make progress on within 10 years.

The hope is that (regardless of whether it’s medicine or technology) the company in question will have contributed something to the industry with their R&D, in turn bringing the industry as a whole forward, which encourages competitors to keep up.

The end benefit is a win-win situation. The company has managed to bring a new product to market (which translates into profits), the industry itself evolves and embraces these new ideas, and consumers get a better experience.

Research and Development and Debitoor

Although there is no specific Research and Development section within Debitoor, it is possible to keep track of your expenses from suppliers and vendors, as well as your fixed and depreciating assets so tools and equipment used for Research and Development can be accounted for.