As the year-end approaches, many small businesses in New Zealand are dealing with tough financial conditions. Recent data from Xero’s Small Business Insights shows a 2.7% drop in sales year-on-year for small businesses in the September quarter, with only a few industries seeing slight growth. In the same period, wages rose by just 2.8%, likely a consequence of weak sales results. In this climate, a cash reserve becomes a business lifesaver, providing the buffer needed to manage unexpected expenses, handle cash flow dips, and stay resilient through seasonal ups and downs.

Why a cash buffer matters for small businesses

"For a solopreneur in health and fitness, end-of-year income can be unpredictable. Clients are more focused on holiday plans, which often leads to cancellations or pauses in coaching. A cash reserve helps smooth out these slower months," says Lucie Robazza, owner of Strenxia, a health and fitness coaching business for busy professional women. Strenxia maintains a minimum three-month cash buffer to cover all operational costs, with plans to expand to six months during the next growth stage. "Slow months are a great opportunity for me — I have more time to work on the business, continue investing in my education, and plan for what's next. Without a financial cushion, I couldn’t do any of that or maintain the confidence and peace of mind to keep my clients on track with their fitness goals," says Robazza.

Quick ways to build your cash buffer by year’s end

We know the pressures during this time of year can make building a cash reserve feel out of reach. But the following tips make it simpler than you might think:

Kickstart a finance cleanse

Begin by identifying unnecessary expenses or costs that can be reduced so that savings can be redirected to your cash reserve. Take a line-by-line look at your expenses to spot unnecessary ones, like unused subscriptions or memberships. To cut down costs further, look for lower-cost alternatives or negotiate better rates with suppliers or service providers. Switching to paperless and energy-efficient solutions can also help save money, as well as leveraging technology to automate processes where possible. And if you need specialised support, consider outsourcing specific tasks to freelancers or agencies instead of hiring full-time staff.

Fine-tune inventory

Avoid overstocking and focus on inventory that moves quickly. For any leftover items from previous seasons, consider implementing tactical campaigns, such as flash sales or bundle discounts, to move them faster. Seasonal promotions around key sales periods can also help clear older stock. Using inventory management tools to track product performance and forecast demand can help avoid overstocking and reduce waste. To keep your operations agile, consider the flexible storage and fulfilment options offered by third-party logistics providers. These will also help to keep your fixed costs down.

Put savings on autopilot

First, calculate how much you need each month for essential expenses. Then, from what’s left, set aside a small amount regularly into a separate account dedicated to your cash reserve. Think of this like a fixed expense — treating it as non-negotiable can help you build your reserve steadily over time. You can start small and increase the amount as saving becomes a habit and your confidence grows. Many experts recommend having enough saved to cover at least three months of expenses. Building this cushion gives your business a reliable safety net for unexpected costs or challenging periods.

Stay on top of payments

To keep cash flowing smoothly, encourage clients to pay promptly by offering small discounts for early payments. Setting clear terms, like requesting a deposit or partial payment upfront for new or larger projects, can also secure some cash flow at the start. For extra peace of mind, consider implementing late fees to discourage overdue payments.

Make automation work for you

If you currently rely on staff for time-consuming accounting tasks, consider outsourcing some of these to a technology platform, such as a financial management service. The Prospa App, for instance, brings everything together in one clear view, giving you greater control over your cash flow. With features like Bill Pay, you can stay on top of payments, track which bills are scheduled and paid, and avoid late fees. Automated invoicing systems, like Xero, also make it simpler for customers to pay on time, and they allow a direct feed from your bank account to sync transactions. This can save significant time and reduce admin work, so you can focus more on growing your business.

Stay ready with a line of credit

Accessing external funds can help you manage day-to-day expenses while keeping your cash reserve intact. A line of credit provides an approved amount of finance that you can draw on as needed, acting as a financial cushion. This can be especially useful for businesses with seasonal ups and downs, retailers needing to make larger purchases, or hospitality businesses that require equipment on short notice. It also lets you take advantage of bulk deals and other income-generating opportunities without dipping into your reserves, keeping cash available when it’s needed most. Want to stay ready no matter what the end-of-year throws your way? Discover how Prospa’s Line of Credit can provide the safety net you need.