Payment terms are the most underrated line on a trader’s rate card. A rate that looks 20 cents better can be a worse deal once you count the days.
A worked example
Assume a 6.6 kW system in zone 3 earns 45 STCs. At roughly $38 each, that is about $1,710 per job. If your crew lodges 10 such claims a week:
| 20 day terms | 1 day terms | |
|---|---|---|
| Value lodged per week | about $17,100 | about $17,100 |
| Money outstanding at any time | about $50,000 or more | about $2,500 |
| Cash tied up | Roughly three weeks of claims | Roughly a day |
Three weeks of certificate value unpaid means you are funding your trader. If you are carrying that on credit, overdraft or supplier delays, the interest or lost discounts quickly outweigh a small rate edge.
The decision
Convert the delay into dollars. If your cost of funds is, say, 10 percent a year, $50,000 tied up costs about $5,000 over a year, before counting the opportunities you missed. Compare that to the rate difference. For most crews, fast settlement wins.
Other things terms hide
Rate lock timing, rejection handling and clawbacks. A 20 day term with an unlocked rate leaves you exposed to price moves while you wait. A 1 day term with an unclear clawback has its own risk. Ask both questions.
What this means for installers
Energy Merchants settles established partners within 24 hours, with a first claim in 48 to 72 hours, rate locked on lodgement of a complete claim and zero fees. See the pricing page, how it works and how long STC payment should take.
There is also the matter of risk. A trader that owes you tens of thousands of dollars for three weeks is a creditor you carry on your balance sheet. Faster settlement shrinks that exposure, which matters if the trader’s financial strength is anything less than certain. Short terms are a cheap way of limiting your counterparty risk.
To turn this into your own numbers, take last month’s total certificate value, divide by thirty for a daily figure and multiply by your trader’s payment days. The result is the money you are lending out, free of charge, every single day. Seeing it as a real dollar number tends to focus the mind far more than comparing cents per certificate.