A LEANER BUSINESS Financial analysts suggest streamlining company operations in order to maximize money and efficiency during recession

So maybe 1991 wasn't the year to launch or expand a business. Credit is scarce, sales are down and receivables are slow. Cash flow for many companies has been reduced to a trickle.

But corporate budget managers can do more than pray. Financial planners and tax specialists say managers can take several steps right now to keep the money coming in.


* Reduce the average collection period for accounts receivable.

Some companies are far too lenient with their clients, allowing them to sit on bills that represent ready cash, says Bryan Milling, author of "Cash Flow Problem Solver" (Sourcebooks Inc., 1991).


Getting your customers to pay up faster just takes resolve.

"You educate your customers in terms of your expectations," says Mr. Milling, a commercial loan officer with Sunwest Bank in Albuquerque, N.M.

When selling terms require payment in 30 days, but you don't call to collect until three weeks after the due date, you've told your clients you don't care when you get paid, he says.

"You just have to get tough, make the decision" to go after accounts that are past due, he says. But he admits that asking for money is not an easy chore. "This is one of those things that in theory sounds good but in practice is difficult."

* Make your inventory management system more effective.

That will help reduce your losses from obsolete or stale goods and free cash for other purposes.

Doing more business with less inventory has been a successful strategy for Finkelstein's clothing stores, the chain's president, Jack Finkelstein, says.

"About 10 years ago, we started subscribing to a merchandising service," Mr. Finkelstein says.


"They take our inventory and sales and give us advice on trends -- what classifications are moving better than others," Mr. Finkelstein added.

Based on their advice, he says, Finkelstein's increased inventory for the holidays but cut back on variety.

"We've narrowed our lines of merchandise so we can be more liquid," he says. "We're staying with the basics -- sweaters and sport shirts. We're staying with two best-sellers, instead of three or four lines."

* Manage "float" for longer use of your cash. Float is the value of checks or drafts that have been written and are in transit but have not yet been collected.

"Managing float is a mechanical process," Mr. Milling says. "First, you identify how much float you have by the date you mail the check and the date it clears the bank. Then it's a function of timing. If you mail it on Wednesday, the recipient will get it on Thursday. But if you mail it on Friday, the recipient might not get it until Monday. That gives you a few extra days."

* Improve financial forecasting and cash flow budgeting methods. "Knowing what is due and when it's due will help you anticipate and avoid cash flow problems," Mr. Milling says.


"The typical entrepreneurial business person says, 'I don't know what's going to happen, so why should I forecast?' But even a poor forecast at least gets you thinking about what your problems might be.

"The problem with the typical mid-market business manager is he knows he needs to do these things, but he isn't interested in them," Mr. Milling says. But when a company is in trouble, it's usually because the owner has avoided a financial problem.

* Annualize estimated taxes. "Most companies pay estimated taxes based on the prior year's tax liability," says Tony Dulo, a tax specialist with McLean, Koehler, Sparks & Hammond in Towson. "However, estimating taxes on this basis becomes a disadvantage if the current year's tax is less than the prior year." He points out that when you overpay tax, you give the government an interest-free loan.

Instead, Mr. Dulo suggests projecting actual income earned to date in each quarter to get a closer estimate of taxes due.

Here's how it works: For first-quarter taxes due April 15, Mr. Dulo suggests calculating actual income as of March 31.

Project that income over a 12-month period, take one fourth of it, and the tax on that amount is what you owe for the first quarter.


"For the second quarter, you take income through May 31, project it over 12 months, take half, and that's the amount you should have paid through June 15," Mr. Dulo says.

"Instead of prepaying and getting a huge refund at the end of the year, you just don't pay as much, and you have that money to use."

Mr. Dulo explains that annualizing works especially well when income is expected to be lower than in the previous year, or when most income is earned late in the year.

"Payments are then postponed to coincide with earnings," he says.

* Generate and expedite tax refunds. "If your current year's tax is overpaid, apply for a quick refund before the tax return date," Mr. Dulo notes.

"If you expect a loss for the current year, apply for an extension to delay tax payment for the preceding tax year," Mr. Dulo adds.


But he cautions that penalties result if you anticipate a loss that does not occur.

* Refinance high-interest debt. While this can be a good cash-saving strategy, Mr. Dulo notes that the savings in interest may represent taxable income. He recommends that companies check with a tax adviser before swapping debt.

* Know when to cut your losses. Then, funnel the cash saved into other parts of your business.

Finkelstein's announced the closing of its Owings Mills Mall store in December and held a going-out-of-business sale.

Mr. Finkelstein says sales were brisk, allowing the company to clear out old inventory, which helped the other three stores.

"Closing one of the stores was a big help," he says, "like a blood transfusion."