As a small business owner, you know it: cash flow is something you must keep your eyes on at all times. But the end of the year can be a particularly testing time for many SMEs.

While no two small businesses are alike, many businesses across industries experience seasonal revenue slowdowns, holiday-related expenses, and delayed payments from clients. While income might dip, fixed costs like rent, wages, and loan repayments remain the same. Retail businesses may also experience cash shortages as they invest in inventory ahead of the holiday season. Add tax obligations and year-end deadlines, and it’s easy to see why cash flow gets squeezed during this period.

But with the right strategies, you can stay ahead of these challenges and ensure your business remains on track. Here are seven practical tips to help you navigate the year-end cash flow crunch.

1Maintain cash reserves

A key strategy for surviving end-of-year cash flow issues is to build and maintain a cash reserve. Start by analysing your financial data from previous years to identify when your slow periods typically occur and how much of a shortfall you experience. Calculate how much you’ll need to cover essential expenses like wages, rent and utilities during these lean months and set aside a percentage of your revenue during busier times.

Want to save time? Automate the process by transferring a fixed amount to a separate account. This will give you peace of mind, knowing your cash reserves are being built on autopilot throughout the year. Don’t forget to update your cash flow forecasts regularly: schedule recurring meetings with your team (or yourself) to spot potential gaps early so you can adjust spending or defer large purchases to next year.

Head to Prospa’s essential guide to cash flow management for easy-to-use tools like a cash flow forecast template, profit and loss projection tool, and more.

2Pre-plan and prioritise expenses

One of the best ways to manage year-end cash flow is to pre-plan your expenses by listing and categorising them into essential and non-essential. Prioritise essential costs like payroll and rent, while deferring non-essential items, such as optional services or new purchases, until after the holiday season when cash flow improves.

This also applies to personal spending as a business owner. Keeping your personal and business finances separate, and prioritising business expenses, will help protect your business’s cash reserves.

3Consider loans with longer terms to lower repayments

For businesses managing debt, opting for longer loan terms can ease cash flow pressures by lowering monthly repayments. While paying off loans quickly might seem ideal, stretching out the repayment term can give you more breathing room.

With Prospa’s Business Loan Plus, businesses can extend terms for loans over $150K up to five years, which reduces weekly repayments and helps preserve cash for other operational expenses. This can be particularly helpful during slower months when income is low.

4Negotiate with suppliers

One often overlooked strategy for improving cash flow is negotiating better payment terms with your suppliers. If you’ve been a reliable customer, many suppliers would be open to extending payment deadlines or allowing you to pay in instalments. This can give you more time to gather the funds needed and reduce the immediate stress. But don’t wait until you’re in a cash crunch — approach suppliers well in advance to negotiate terms that work for both of you.

For example, instead of paying invoices in 30 days, see if your supplier will agree to 60-day payment terms. Alternatively, if you have a large expense coming up, you can ask to break it into smaller instalments. The key is to maintain good communication and a positive relationship with your suppliers, which often makes them more willing to be flexible.

5Consider a line of credit to improve cash flow confidence

A line of credit provides businesses with quick access to funds, without the hassle of reapplying each time cash is needed. With a line of credit in place, you can cover short-term expenses, like payroll or urgent supplier payments, without having to resort to costly, short-term loans or making tough cuts to your operations. The best part of a line of credit is the control it offers. You don’t need to take out a lump sum loan: you simply borrow what you need, when you need it.

Prospa’s Business Line of Credit gives you the flexibility to draw down as little as $2K, up to $500K, while only paying interest on the funds you use. This helps keep your costs down and manage unexpected cash flow gaps on your own terms.

6Make sure your invoices are getting paid

While it might seem obvious, late payments are one of the most common causes of cash flow problems. To pre-empt them, send invoices promptly and offer multiple payment options to make it easier for clients to pay on time. Consider offering discounts for early payments or charging late fees for overdue accounts to incentivise timely payments. Sometimes, a friendly follow-up is all your client needs—often, it’s more effective than you might expect.

With Prospa’s Business Line of Credit, you can use Bill Pay to settle your bills directly from the line of credit, giving you the flexibility to manage cash flow by covering expenses when needed. Plus, all transactions automatically sync with Xero, reducing manual data entry and giving you better visibility into your finances.

7Get a better view of in’s & out’s by centralising your finances

Having all your financial activity in one place makes managing cash flow easier. By integrating accounting software like Xero, you can track expenses and profits in real time while reducing manual data entry and overall admin. Xero also helps streamline invoicing by sending automatic payment reminders and tracking payments for you.

When everything is centralised, you’re more likely to avoid nasty surprises, like an unpaid invoice you’d forgotten about, which could be the key to a smoother, stress-free end of the year.

Find out how Prospa can help you stay on top of your finances.