Today is a difficult time for businesses as the economy struggles to keep growing while being hindered by one crisis after another. One way to ensure your business doesn’t go bankrupt is to maintain healthy cash flow. Cash flow is an indicator of a well-run business and tells you what direction your business is taking.

Not only does it help one see a clear picture of profit or loss, but it has other perks as well. A healthy cash flow facilitates loans at a cheaper rate and longer payment schedule. It ensures a debt-free life as well.

In order to maintain a healthy flow of cash in your business, here are the five easy ways that will help your business thrive.

1. Separate Personal And Business Finances

Nothing brings down a business more than adding your personal debts to the business ledger. Always treat your business as a person with its own agency and its own books. Any mix up can lead to utter confusion and result in financial ruin.

Have separate business and personal accounts. Have separate accountants to do the books if necessary. And always maintain separate ledgers for your own clarity.

2. Be Careful Who You Do Business With

For small items, getting paid upfront is the key. If you must collect delayed payments, ensure it is a customer you know and trust. However, for bulk orders of items of a bigger price tag, the rules are a little different.

Although it is wise to do business only with people you trust, it will be difficult to expand your customer base that way. But what you can ensure is devising an effective payment plan.

Have strict schedules on payments to be made in case of newer customers. In the case of post-delivery payments, it is a good idea to hold on to collateral or do your transactions via a banking system. Keep a close eye on the payment collection schedule and enforce it.

Another way to encourage upfront or timely payments from customers is to offer suitable discounts for payments made on time. By doing so, you may lose out a few bucks in your profit margin, but your cash flow will move smoothly. Similarly, on the same lines, enforcing a late payment fine ensures that customers do not fall back on their payment schedule.

3. Keep Track Of Your Payables And Remain Debt-Free

A key reason many businesses run into debt is that they keep delaying payments to their suppliers, miss out on EMIs on their bank loans, and finally, when they set out to pay them, the cumulative amount is far too large. Maintaining a record of all your day to day payments to be made, is an effective way to ensure that that does not happen.

For this, the first step is maintaining a book that tracks the schedule of all your account payables and reminds you of them. Doing so also allows you to dive deeper into where and why you are spending your money and to make effective cutbacks if necessary.

Being a business that always makes payments on time also earns you considerable goodwill. In case of a sudden rough patch, your suppliers will be a lot more understanding of one or two delayed payments if you have an excellent track record.

This kind of an understanding relationship goes a long way in day to day activities of your business as well. Usually, for any business, if all payables are due on a single schedule each month or quarter of the financial year, it is easier to keep track. With a better relationship with your suppliers or your bank, you will be able to convince them on a consistent payment schedule irrespective of when delivery is made.

4. Take Advantage Of Tax Breaks

Whether it is for paying taxes on time, or because of some other government scheme that makes you eligible for them, tax breaks are essential to the success of businesses. With the GST introduction, an important way that it is granted is through the input tax credit.

For example, assume you are a manufacturer you bought raw materials at an 8% tax rate which amounted to you paying a tax of Rs 8,000. When you sell the same good, it is now taxed at 12% which you charge the consumer. Suppose this 12% amounts to Rs 12,000. You are expected to pay the whole Rs 12,000 to the government.

However, since this item you now sold has ended up being taxed twice, you are eligible to apply for input tax credits for the initial Rs 8,000. On its return, you would now have paid a tax of Rs 4,000 only. Since GST rates in India are different for different categories of goods, this kind of tax break is often a safe haven for businesses.

5. Turn A Profit

Your cash flow will remain healthy as long as you turn a profit. Many businesses start off with negative cash flow, in the beginning, putting more money into the business than what they are getting out of it. However, if you allow this to become long term, there is no way your business will survive.

Maintain a well-audited inventory. Do not stock any more than what is absolutely necessary. If a stock is not moving along, do not take delivery of new stock for no reason.

Do not keep a bulky business. Get rid of equipment you no longer need. This helps keep your cash flow healthy as well as keep upgrading your business.

Calculate your breakeven. Knowing how much you must make exactly to ensure you are not running losses is the first step towards turning a profit.

Understand the products and services that sell well and concentrate on making them better and investigate what makes them stand apart and try to emulate the formula. Repeating your bestsellers and cashing in on their success is a sure shot way to increase your profit-making. Get rid of the products that are bringing you down.

Most importantly, find your niche and stick to it. As long as you put in your hundred percent and are smart about your finances, your business will most definitely succeed.