Cash Waterfall w/ quarterly contracts

Consider doing the cash waterfall by quarter instead of by month. I assume that this will help match with the way that your revenues are being earned.

If there is a requirement that you must have this monthly, then you will need to have months with a significant surplus of cash to offset the months without cash. This could be the goal of this exercise, to find this information out.

One of the most dangerous things that I discovered at one firm was one of our facilities had a huge revenue jump in a particular month every year. The cause of this was that years ago, a person went to the site and started to go through the contracts. They discovered that many customers had been left at the same price for a few years. They spent about a month there and set things up so that customers would get a token increase. Trust me, not the worst thing I saw at that firm.

I ended up solving the issue by creating a separate Revenue waterfall that simulated quarterly invoices.

Simply put, I took the recognized revenue, divided it by four, and spread the 4 invoices every 3 months. Simple, I know - but now I can easily convert booked revenue into expected cashflow.