Building a Summer Cash Buffer: Why May Is the Best Month to Stress-Test Your Working Capital

Why May Is the Time to Plan for Summer

By the time July hits, your options shrink. Customers are out. Banks take longer to approve loans. Vendors are less flexible. The moves that work best happen before the season starts.

In May, you have:

• Time to push collections. A receivables clean-up in May lands cash in your account in late May or early June — just when you need it.
• Time to apply for credit. A line of credit application takes three to six weeks. Apply in May, and you have it by July.
• Time to renegotiate vendor terms. Vendors are more flexible when you are not desperate. May conversations go differently than August conversations.
• Time to make hiring decisions. If summer cash is going to be tight, May is when you decide whether the next hire happens now, in September, or not at all.

The cost of waiting is real. A summer cash crunch usually triggers expensive moves: a high-rate merchant cash advance, late vendor payments that damage relationships, or skipped owner pay. None of those happen if you plan in May.

The Three Cash Flow Risks That Hit in Summer

Summer cash issues come from three places. Different businesses get hit by different combinations.

Risk 1: Slower Collections

Customers go on vacation. Their AP teams go on vacation. Invoices sit. The 30-day customer becomes a 45-day customer. The 60-day customer becomes a 90-day customer. Multiply that by all your receivables and you can lose two to three weeks of cash without losing a single sale.

Risk 2: Lower Sales

For some businesses, summer is a real slow season. Service firms see fewer engagements start. B2B sales cycles stretch. Construction firms hit weather and labor issues. Retailers and online sellers may peak in summer, but most others do not.

Risk 3: Big One-Time Expenses

Summer is also when many businesses face big outflows: the Q2 estimated tax payment in mid-June, annual insurance renewals, a Q4 inventory build, equipment purchases for the next season. A normal monthly P&L hides these. The 13-week forecast does not.

For seasonal businesses, especially in construction, our guide on seasonal cash flow for contractors walks through these patterns in more depth.

How to Stress-Test Your Working Capital

A cash flow stress test is exactly what it sounds like: you build a model of your cash, then push it through worst-case scenarios to see where it breaks.

A simple test asks four questions:

• What if my biggest customer pays 30 days late?
• What if my June revenue is 20% below plan?
• What if my biggest vendor demands payment up front?
• What if my line of credit is not available?

For each one, look at your 13-week forecast and ask: do I still cover payroll? Do I still cover rent? Do I still cover taxes? If the answer is no in any week, you have a real problem to solve before that week arrives.

For more on the gap between profit and cash, see our guide on why profitable businesses still run out of cash.

Step 1: Build a 13-Week Cash Forecast

A 13-week cash forecast is the single best tool for managing cash. It shows the next quarter on a weekly basis — not monthly, not annually. Weekly.

Here is what it looks like in plain terms:

• Top row: 13 columns, one for each week.
• Starting cash: What is in your bank account right now.
• Cash in: Customer payments expected, broken down by customer or invoice.
• Cash out: Payroll, rent, vendor payments, tax payments, owner draws, debt service.
• Ending cash: Starting cash plus cash in minus cash out.

Update it every Friday. Replace the previous Friday's projection with what actually happened. Roll the bottom row forward by one week. That is the whole process.

For a step-by-step build, see our guide on how to build a 13-week cash flow forecast.

Step 2: Push Your Collections Now

Every dollar you collect in May is a dollar you do not have to worry about in July. Run a focused collections push in the second half of May.

A 14-day collections push usually includes:

• Pull your AR aging report. Anything past 30 days gets a phone call this week. Not an email. A call.
• Reach out to anyone with an open balance over $5,000. Even if they are not yet late, ask when payment is coming.
• Offer an early-pay discount. A 1% or 2% discount for payment within 7 days often pulls cash forward at very low cost.
• Tighten up your invoicing process. Are invoices going out the day work is done, or weeks later? Same-day invoicing is the easiest cash flow improvement most businesses can make.

Our guide on how to get paid faster goes deeper into the playbook. The short version: most owners are too polite about collections, and it is costing them real money.

Step 3: Stretch Your Payables (Smart)

Stretching payables means paying vendors a little later, not stiffing them. Done well, it gives you free working capital. Done poorly, it damages relationships and credit.

Smart ways to stretch:

• Move from net-15 to net-30 terms. Most vendors will agree if you ask in advance.
• Pay on the due date, not before. If a bill is due May 30, pay it May 30 — not May 1.
• Use a business credit card with a 25-day grace period. Pay the vendor today, pay the card in 25 days. Free working capital, as long as you pay the card in full.
• Negotiate annual contracts. Some software vendors will discount annual prepays. Compare that discount to the cost of holding the cash for 11 months.

What not to do: pay late without telling vendors, miss promised payment dates, or use vendor float as a permanent fix. That works once. Then you lose the relationship.

Step 4: Pre-Approve a Line of Credit

A line of credit is the cheapest insurance you can buy for cash flow risk. You only pay interest on what you draw. The rest of the time, it costs almost nothing — just a small annual fee.

In 2026, the rate environment is still elevated. The Fed held rates at 3.5%–3.75% through the first half of the year. That makes both lines of credit and short-term loans more expensive than they were three years ago. But it also makes them more important to have lined up before you need them.

Banks approve lines based on three things:

• Clean books for the past two years
• Growing or stable revenue trend
• A strong cash position at the time you apply

All three of those tend to look weakest when you actually need the money. So apply now, while your Q1 numbers are strong and your bank account looks healthy. Once approved, the line sits there until you need it.

For more on choosing the right financing, see our guide on financing options for cash flow and small business loan tips.

How Big Should Your Cash Buffer Be?

There is no single right answer. But here are the numbers that work for most businesses.

For a deeper dive into how cash reserves work and where to keep them, see our guide on building business cash reserves.

The May Cash Flow Action Plan

Here is the simple version, in order:

1. Build (or refresh) your 13-week cash forecast this week.
2. Run a stress test using the four questions above.
3. Launch a 14-day collections push starting next Monday.
4. Renegotiate one or two vendor terms from net-15 to net-30.
5. Apply for a line of credit if you do not already have one.
6. Set a target cash buffer based on the table above.
7. Update your forecast every Friday from now through September.

A 90-minute stress test in May is the difference between a quiet summer and a panicked one. Most owners do not do it. The ones who do are the ones who never get caught short.

For the full picture of how working capital, AR, AP, and reserves work together, see our cash flow planning guide and our deep dive on closing the working capital gap.

Frequently Asked Questions