My role at Workday Adaptive Planning is focused on supporting our channel partners and especially our platinum partner Revelwood. This blog post is the first in a series highlighting the innovative models Revelwood has been building. These reusable models not only demonstrate the art of the possible, they also energize your planning process and get you to value quickly. This first model is for an industry that is not only thriving, but critical to the future of the planet — renewable energy.
Solar power is the fastest-growing source of renewable energy, projected to grow from providing 11% of the US’ renewable energy to 48% by 2050. In the last decade alone, solar has experienced an average annual growth rate of 49%. There are more than 89 gigawatts of solar capacity installed nationwide, powering 16 million homes. Solar installation is the largest segment of the rapidly growing solar market and the installation market is forecasted to expand over the next five years. Let’s look at some stats about renewable energy:
- Renewable energy creates 5x more jobs than fossil fuels – and these jobs are created locally
- Massive corporations are pledging to go green – these include:
- Bank of America
- Renewable energy can help you save money
- Sales of electric cars doubled in 2021 – despite the semiconductor chip issues and supply chain challenges!
The nature of the solar installation business creates many challenges for budgeting, planning and forecasting. Forecasting revenue and associated costs across shifting open projects is difficult, making it problematic to determine cost allocation and project profitability. The industry has complex head count planning needs, using a combination of full-time employees and contractors so capacity planning is increasingly critical in this tight labor market. Often solar construction contracts are milestone-based, which is reflected in revenue recognition and billing. Many solar operators have an acquisition arm that will acquire projects, construction arm to build out new capacity, and operations arm to manage the properties creating a multi-company consolidation and intercompany elimination challenge.
All these projects and growth are wonderful, but they require a lot of cash, making, cash flow forecasting critical. There are huge funds of investment readily available especially for green energy projects, but no one likes to write checks on short notice. Getting the cash you need, when you need it, at a favorable valuation, requires real rigor in your near term and long-term planning. For organic growth, solar installation companies need to know when new capacity will be available, generate revenue, bill and clear accounts receivables, in order to staff up new projects, meet demand, and fuel more growth.
Solar companies also tend to run light on back-office staff and need a planning solution that does not require adding additional resources to the finance or IT teams. Cloud-based enterprise planning solutions are the best fit for this scenario.
These businesses have some industry-specific requirements for their forecasting and planning systems. Revelwood has built a model that addresses three primary needs:
- The ability to quickly and easily pull data from their ERP (NetSuite, Intacct, QuickBooks, etc.) and into Adaptive Planning. You can’t move fast without integration and automation.
- A greater ability to slice and dice critical data for cash flow forecasting, headcount planning and operational planning.
- The ability to perform complex and sophisticated forecasting and budgeting, particularly for understanding project-specific cash flow using milestone-based recognition and planning.
Solar installation companies rely on milestones on their projects in order to get paid. Many in the industry use Scoop Solar Project Management software to automate operations, manage projects and track milestones.
Revelwood’s model correlates achieving milestones with expected income and recognizing costs by budget category. For example, if a project reached all its milestones on time, the company’s cash flow projections would be accurate. On the other hand, if the milestones were pushed back and dates slipped, the cash flow projections would be off. The Adaptive Planning solution enables solar installation companies to quickly and easily adjust the cash flow forecast by manipulating the planned achievement of achieving milestones on each project.
The model takes advantage of Adaptive Planning’s version control and dimensionality. Not only can the company analyze data at a high level – such as overall cash flow or project gross margin– but also on a granular level by any number of factors. Solar companies can analyze projects by state, region, and other key segments.
With the Adaptive Planning-based solution, solar installation businesses can easily aggregate all their companies, manage intercompany accounts and eliminations. They can model out new potential construction project profitability and acquisition opportunities. They can set all the metrics to track operational metrics, capacity, revenue and profitability by each managed site.
Overall, solar installation companies that adopt Revelwood’s Adaptive Planning model can:
- Analyze projects by state, region and other key segments
- Energize their analysis
- Sustain the business
- Fuel more growth!
At the end of the day, everyone wants to do their part to support green energy initiatives. The key to real growth in the sector is attracting the funding needed, keeping the projects on track and profitable, and put the rigor in to sustain the business.
Stay tuned for more blog posts highlighting the models Revelwood is building for Workday Adaptive Planning.