How to Increase Solar Revenue (Without Changing Your Business Model)
Even before the pandemic brought the supply chain to a grinding halt, the renewable energy sector had been feeling the squeeze. While the cost of installation has dropped by a whopping 60% in the past ten years, the economics around pricing solar energy has been a trickier process.
The original 30% solar power tariffs introduced in 2018 only dropped to 15% in 2021. But now, solar energy companies must contend with supply chain constraints that have caused annual prices to skyrocket. In 2022, utility-scale solar prices have soared by 18%, yet 13% of projects will likely be delayed.
Despite market uncertainty, consumers are still demanding more affordable solar power and installation services.
Stretched thin, where does your solar company find the money to grease the wheels?
Finding Leakages in Your Solar Company
It doesn't matter which part of the business you're in: Supply and installation, own-and-operate models, or solar farm organizations can all have significant money leaks. A lack of visibility into any department of your business can lead to lost dollars and cents. And combined with manual processing, your organization could be hemorrhaging money.
When you map out the business operations in any department, you're likely to find similar instances of unintentional waste, all of which effects your productivity, client and vendor relationships, and cash flow.
Let's take the finance department. Money in, money out—simple, right?
Not so fast.
Even if you only look at accounts receivable (AR), you can find several ways that processes can go wrong and cost serious money to fix. But even if they "go right," you're still shouldering hidden costs.
Consider this typical scenario: You need to bill a company for a recent solar development project. So your team sends a PDF invoice through their ERP.
Your client receives the invoice. But they pay by check. So their AP team puts off the payment until they can process all of their invoices for that month. And you aren't first-in-line.
Like your AR team, they use an ERP. But it's a manual process, and their workers need to laboriously add the invoice details into their ERP before cutting the check. But, eventually, it happens. They slip your check-in into an envelope and send it. After a few days, it arrives in your bank lockbox and must be processed by the bank. A couple more days pass, and your AR team finally receives the payment.
But, then they have to reconcile it. Failure to mark the bill as paid can result in stressed client relationships and an unbalanced ledger. Let's say they close the invoice without any issues for our purposes. If you're lucky, this process takes 30 days, tops. But it's common for a solar company to wait 60 or even 90 days for payment!
Throughout this process, you've had to pay the hidden cost of manual labor and waiting. Meanwhile, your AR team and your client's AP team could have been spending time on more high-value tasks.
And if they pay with something more convenient, like a credit card? It sounds nice, but then you're slapped with a 2.9% credit card processing fee, which cuts into your revenue.
These are the normal scenarios for thousands of businesses! When you add in the potential for error due to manual processing, the cost of corrections, and other potential issues, you can imagine how much a solar company can lose in just one part of the business.
But there's also a best-case scenario that eliminates or significantly reduces both the time and cost waste.
Increase Solar Revenue with Automation
The solar industry is all about creating a more sustainable and clean energy system. For AR teams, payments automation is a more sustainable finance department.
Finance professionals have reported that manual processes are primarily at fault for lost documents, compliance issues, and reduced productivity. Another survey found that shifting to invoice automation alone can reduce costs by 80% and allow 3.1x more invoices to be processed without any interaction.
But you may ask, how much does it actually cost to process an invoice, and is it worth it? It can take between $12-to-$30 to process a single invoice if there are no errors. A best-in-class automation software causes this rate to plummet to $2.56. When you scale these savings by your client and vendor base, you can understand how much the base savings could be.
Automation can mean getting paid for your solar installation or solar project faster. At Paystand, we see days sales outstanding (DSO), or the wait for invoice fulfillment, drop by 60%.
In order words, you get paid faster while reducing the effort and cost it takes to send an invoice. As a result, a solar facility or company can more easily pay suppliers or manage inventory, thus improving relations with suppliers. You may even be able to capture early payment discounts.
However, it can get better. To really increase solar revenue, there are ways to you encourage preferred payment systems.
For example, you can offer more than credit cards or check payments. ACH and bank-to-bank transfers are ideal for both commercial and residential clients. Both are easy to use, you can verify bank account balances in minutes, and they cost less to process than the alternatives. You can choose to absorb the small costs of these transactions to make them "free" for your client.
You can also shift the credit card processing fee to the customer as a convenience fee. This not only saves you money but it encourages faster and more secure payment methods.
At the same time, you get 100% transparency into the payments process with enhanced analytics, making it easier than ever to create an optimized payments strategy.
All that money and time you save from automation can then be used for your next solar project or following up with solar leads.
Grow your Solar Development Business with Paystand
Running a solar farm or facility isn't easy. And if you have a sprawling solar installation business, we understand that you have many moving pieces.
But in good times or bad, it's critical to have a lean business operation. The more automated and simplified specific processes are, the more money and time you save as a solar developer. More importantly, if automation translates into higher transparency, you'll have the ability and vision to pivot when required.
At Paystand, we believe that creating a scalable business starts with the cash flow cycle. We're the Venmo of B2B transactions, and our customizable integration works with all major ERPs, so your finance team doesn't have to relearn a new software.
But are we right for your solar company? Book a brief demo with our payment experts today.