Revenue Cycles: Smoothing Out Uneven Cash Flow

While business forecasts and projections can point to ballpark goals, revenue cycles themselves become rather 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 uneven revenue cycles can go a long way towards growth and overall success.

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. For service-based companies, customers may allow contracts to lapse or fail to renew service subscriptions. In all of the above scenarios, having revenue tied up in receivables can place a strain on finances. While big businesses might feel a slight impact from cash flow turbulence, new and smaller businesses are affected more severely. Uneven revenue cycles can, in extreme cases, mean the difference between hitting a major 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 for a boost in cash flow. However, the capital from loans, and the accompanying debt, can cause even bigger 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.

In order to correct 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 both cover obligations and make plans for growth.

New Century Financial offers invoice factoring and funding solutions to a wide range of industries. If your businesses 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.