What Mystic said, x2. My wife is a quilter, so it takes no time to get that cotton flannel cut with her rotary cutter into precise 2x2 squares.
Perhaps the most important thing to note about all of this (and nobody mentioned it so far), is that all cloths, even so-called "untreated" cloths, are coated with sizing at the factory. This is like a microscopic, invisible barrier that keeps the fabric looking clean and stiff as it sits on the rolls. I'm dead certain that even the commercial patches that you buy are still coated with this stuff.
It GREATLY reduces the absorbency of the fabric, for obvious reasons.
The solution is simple: just run the cloth through your washing machine once. You can throw it in with a load of towels or sheets, etc. That one wash will get rid of the sizing and set the fabric for use. Once it's dry, just cut it into squares and you're in business.
It makes a difference.