Solutions for Slim Margins in the Solar Industry

May 3, 2023 by Zazil Martinez

In the solar industry, competition is fierce, and companies constantly strive to establish their brand and gain a competitive edge. While a promising technology with significant benefits for the environment and energy sector, businesses in the industry face numerous challenges, such as improving efficiency and reducing costs while maintaining competitive pricing for their customers.

Solar power and renewable energies are one of the most promising technologies. They're a positive change to the energy sector, aiming to improve the environmental impact, lower customer costs, and provide a new source for aging grids.

Growing over the last decade, solar has become a highly competitive industry. Each company wants to outbid the next, establish its brand, and become the dominant player in the industry. With this level of competition, the critical question as a solar operator becomes, "How can I adopt a competitive advantage to improve efficiency and lower your costs?".


How to Achieve Competitive Advantage in The Solar Industry

In an ideal scenario, you land a project, buy the equipment wholesale, and lead your crew for installation. Commercial projects have more lucrative contracts than residential, but the sales process and turn-around time for receiving funds are longer. You're left with a razor-thin ROI when you pay your operations team and overhead.

Because of the competitive market, you may be only profiting from the installation. In reality, within the standard business model of the solar industry, the margin has not been a player on your team. The average operating margins for the PV industry hovers around 12-16%.

So, where do you find that financial edge to give an advantage to your PV company without sacrificing competitive pricing for your customers or durability in your business model? That's where billing and payment software can significantly contribute to your ROI. Next-generation payment solutions that lower transaction costs, speed up your time to cash, and create margin efficiency may be a game-changer for the solar industry.


How Billing and Payment Software Help the Solar Industry

Most solar companies receive their money through checks or credit cards. These options are a perfect financial storm for a few reasons:

  1. Checks are often standard with commercial clients. Still, they extend your DSO, increase bounce and late payment risks, and add time and overhead to your AR team to reconcile the payments.
  2. As a result, more solar companies have begun accepting credit cards. They increase customer convenience and improve efficiency but come with a significant cost. Banks and card networks take advantage of these large transactions and charge 3-3.5% of the sale in processing fees.

Consider that for an average solar installation of $22,800, it is common to see the credit card cost upwards of $600 just to get paid and annual processing bills in the hundreds of thousands of dollars for a mid-market solar company. With industry averages of 12-16%, this hardly seems fair. It's out of line with the initial goal to remain effective and eats away at the goal of longevity in the business model.


Improving Business Efficiency in the Solar Industry with Paystand

It would be great to have digital payment advantages and the efficiency of cards but at a lower cost. This is where Paystand's payment-as-a-service model comes in. Paystand offers significant savings for solar businesses leveraging technology and robust card rates to lower your total cost. It digitizes your AR process with the following:

  • eLockbox and billing portal
  • Recurring payment capabilities
  • Back-office virtual terminal
  • Invoice and accounting software integration

Paystand is designed to speed up your time-to-cash and increase your business efficiency. Receive a powerful custom solution to your finance needs, derive tangible efficiencies in your payment flow, reduce DSO and cost, and increase your margins—a very bright outcome for the Solar Industry.

Want to know if our digital billing and payments platform is right for your firm? Book a demo today. We'd happily show you how we've helped other solar and energy firms like yours.