While business forecasts and projections can point to ballpark goals, revenue cycles themselves become somewhat uneven when analyzed on a more granular level. Sale figures fluctuate. For businesses that issue invoices with payment schedules of 30 days or longer, smoothing out inconsistent revenue cycles can go a long way toward growth and overall success. One of the most essential solutions is revenue cycle factoring.
What Causes Uneven Revenue Cycles?
There is no one main reason that causes revenue cycles to rise and fall. The overall strength of the economy certainly plays a big part. In some cases, customers purchase conservatively in one period and then buy aggressively in the next. Customers may allow contracts to lapse or fail to renew service subscriptions for service-based companies.
In all of the above scenarios, having revenue tied up in receivables can strain finances. While big businesses might slightly impact cash flow turbulence, new and smaller companies are affected more severely. Irregular revenue cycles can, in extreme cases, mean the difference between hitting a significant growth milestone and being unable to make payroll.
Corrective Measures
Not all solutions are created equal. Gaps in revenue cycles may push businesses to take out short-term loans to boost cash flow. However, the capital from loans, and the accompanying debt, can cause even more significant problems. Once the money from the loan is used, the debt remains until the balance is repaid.
If revenue cycles become uneven in the future, the capital needed to fill in any gaps will also include debt from the previous loan, and borrowing will only exaggerate and compound the problem. Learn more about making payroll during uneven revenue cycles.
To correct uneven cash flow issues and smooth out revenue cycles, businesses need a fast and debt-free solution. Invoice factoring is an alternative to traditional loans and can be used to unlock capital tied up in unpaid invoices.
Factoring doesn’t place any debt on the books and ensures an optimized cash flow, so businesses can maintain capital reserves to cover obligations and make growth plans. Please find out about staggered receivables as they are compared against cash flow.
New Century Financial offers invoice factoring and funding solutions to various industries. If your business is experiencing uneven revenue cycles, or if you want to protect your business against cash flow turbulence, contact New Century Financial today and learn how our factoring services can help you.