"Time, time, time is on my side, yes it is," sang the Rolling Stones. Clearly, these lyrics were composed long before the group became astute businessmen. For once you start up a business, time is never on your side. Instead, you're constantly coping with payments that are due, invoices that may be late, and tax- filing dates that creep up at the most inopportune moments. Payables and receivables rarely align.

And if cash flow didn't pose enough of a problem, you also have to contend with the time-juggling challenge of inventory. Anticipating fast-moving items in order to have enough on hand. Pushing to get slow movers sold in order to recoup your investment. Keeping storage costs at a minimum, and tracking stock.

A final time-driven headache for those involved in seasonal operations is maximizing your high season, and successfully struggling through your slow one.

No, time is definitely not on your side. The good news is that you can square off against time, and you can win. The bad news is that as the clock ticks, any time-bound problems you may have are growing worse.

Which means there's no moment like the present to start outwitting time. So take advantage of the following strategies for handling three of small businesses' biggest time-crunch challenges: collections, inventory management and seasonality.

Success at Collections Means Beating the Clock

Bad accounts are the rogue elements of receivables management, and although atypical, can nonetheless expose you to serious losses. For added to the financial blow of the nonpayment itself is the risk - real or imagined-that any action you take to recover the money could subject you to even greater damages. Such as an injury to your reputation, or the alienation of a customer who might otherwise have brought you future sales. Thus many business owners simply decline to act, and bad accounts are allowed to slide.

"The biggest problem is self-deception," claims Anthony Cohn, a Boston lawyer specializing in collection. "Owners think, 'Things are really okay, the money will come' or 'Surely it's an oversight' and, believe me, it's never an oversight. As a result, they put off developing concrete plans to obtain the money owed them."

Cohn advises businesses to protect themselves by documenting the elements of all transactions with confirming letters, records of phone calls, and detailed invoices complete with payment terms. This removes grounds for future disputes and, better yet, provides solid grounds for demanding your money.

Cohn also recommends sending a straightforward letter that recaps the terms of the arrangement and calls for payment by a certain date. ("Our terms, when you placed your order, were that we would receive [amount] by [date].") If payment isn't made by the date specified, says Cohn, send out a second reminder.

No response? Then send out a third letter stating that unless a "satisfactory arrangement" (a repayment schedule, generally) or full payment is made by a certain date, the case will be filed in small claims court or referred to a collection agency or a lawyer.

"Remember that you can threaten to take stronger action only once," warns Cohn. "Above all, don't let things drag on."

In fact, claim experts, the key to successful collections is fast response. Jane Applegate, author of Jane Applegate's Strategies for Small Business Success (Plume, 1995), notes that it's difficult to get money more than 20 days past due and almost impossible after six months. Thus she recommends you send your first letter one or two days after the missed payment was scheduled and follow up rapidly if payment is not subsequently received.

According to Les Kirchenbaum, president of Mid-Continental Agencies, a collection agency based in Glenview, Illinois, you can also make that first response and any necessary follow-ups by phone. One or two weeks after a payment was due, Kirchenbaum suggests, call and speak personally with "the person who actually makes payments" to find out whether the original invoice was received.

Though Anthony Cohn would question their honesty, many companies claim they've never seen the invoice, and some pay promptly after it is faxed or re-mailed. If the customer acknowledges receipt of the original invoice but still doesn't pay, a similar strategy for the second call is to begin by asking when the payment check was sent, since it hasn't arrived.

Another critical factor in collections is a factual, professional manner. Your letters, advises Applegate, should be clear and simple, stating the amount due, asking for immediate full payment and avoiding a nasty tone that, she cautions, can make customers feel justified in not paying you. Your second letter should be firmer than the first and your third, if needed, should state that it's a final notice and that you'll initiate legal action unless payment is received within 10 days. Similarly, Kirchenbaum stresses, your phone calls should be polite, never aggressive or argumentative, yet also firm enough to "get a commitment. Don't let them off the hook."

If calls or letters fail to produce results, then exactly how do you initiate stronger action?

Your first recourse is small claims court. Phone your local small claims court to learn whether the dollar amount of your dispute falls within its guidelines, which vary by state, and to find out which county's small claims court has jurisdiction over your case. You can receive filing papers by mail, and the filing fee is minimal. To get complete details, consult Everybody's Guide to Small Claims Court by Ralph Warner (Nolo Press, 1995).

A second option is to hire a lawyer - a particularly cost-efficient option, says Cohn, if you have multiple problems, since paperwork for different cases can be batched together. Bear in mind that winning your case in court doesn't guarantee you'll get your payment; but a court judgment, whether in municipal or small claims court, gives you aggressive legal tools to help you collect the money owed. Call your local Bar Association office for a referral.

A third option is to engage a collection agency. Like lawyers, agency personnel are experienced professionals. Unlike lawyers, who sue debtors in court, they use intimidating letters and phone calls to try to get debts paid voluntarily.

For their work, they'll charge 25 to 50 percent of the amount collected - the percentage often reflecting the energy they expend - and some will charge only if their efforts are successful.

To screen agencies, counsels Applegate, check their operation first-hand and get references from former clients in order to evaluate their track record. Be aware that intimidation has lost some of the clout it once had, so collection agencies sometimes have bigger guns available: staff lawyers or a strategy of buying up your bad accounts and hiring a lawyer to sue your debtors - now theirs - in municipal court.

Still, the best policy on collection options is to avoid needing them in the first place. Here's how to build safeguards into your receivables:

·Make credit harder to get.

Screen credit applicants rigorously, advises Applegate. From each potential credit customer, obtain the following three things:

l. A credit application, so you can run a credit check, and a release form for bank information.

2. Three or more trade references, which you'll phone.

3. Copies of the company's last three bank statements, which you'll examine for a healthy cash flow, for checks written in the amount of the sales you anticipate and for an absence of overdrafts.

·Pay someone else to assume the risk.

To avoid the risk of nonpayment altogether, stop carrying your own accounts. One way is to encourage credit card sales - which means establishing arrangements with every credit card company possible. Alternatively, get a credit card number plus expiration date for all your credit customers with the written and signed understanding that, as a backup, charges 60 days in arrears will be charged to their credit card.

Another option is to work with a factor. Factors clear credit for new customers and set credit limits for all customers. Most important, they also buy your accounts receivable, assuming responsibility for their collection, and pay you a percent of their value based on the amount of risk involved. Since this percent may be on the low side, you should first weigh the guarantee of getting something from all your accounts versus the possibility of getting nothing from your bad ones.

·Take precautions internally.

Develop clear, timely work procedures of your own, recommends William A. Cohen in The Entrepreneur and Small Business Problem Solver (John Wiley & Sons, Inc., 1990). Mail invoices promptly so you can minimize the time between sales and payment and become aware of any nonpayments immediately. Monitor your accounts regularly and send credit customers a monthly update. And adhere religiously to the credit limits you've established for individual customers until their updated financial picture justifies a higher line of credit.

But above all, act quickly in responding to delinquent accounts. Rather than surrendering to fears of alienating an old customer, take rational steps to recover the money owed you. Studies show, in fact, that clearing the debt, like clearing the air, is prerequisite to reestablishing the open, trusting relationship you and your customer once enjoyed.

Inventories: Taking a Harder Line Can Help Your Bottom Line

The first "scientific" system for inventory management was developed early in this century by Henry Ford, who bought items only at the last minute in order to obtain just what he needed, just when he needed it. Just-in-time buying, as it's called, frees you from the financial drain of back orders, inventory carrying costs and slow movers on your shelves. It prevents overbuying. Moreover, since empty-looking shelves are your signal to buy, it saves you from the tedious job of minutely tracking how every item you carry is selling.

The drawback of just-in-time buying in today's market is that it leaves you with inventories too thin to meet unexpected demand. Yet the concept behind it - of stocking only what you can use or sell - presents not only a solid idea but also an achievable goal. Indeed, the most basic rule of inventory management is disarmingly simple: concentrate on your fast movers and reduce or eliminate your slow ones.

This, however, is easier said than done.

"It's hard to change from the time when you could afford to over- inventory in anticipation of that big sale that came of nowhere," prefaces Jay Markell, vice president of M. J. Markell Shoe Company, a Yonkers, New York, wholesale distributor of children's orthopedic and adult accommodative shoes. "These days, however, accounts payable become too high in the event of a sales drop-off. But the problem with inventory is still the old question: how much is enough?"

In answering that question, Markell Shoe Company has retained traditional inventory levels for its faster-moving shoes and made slow-moving shoes available by special order only. To assess the sales activity of specific merchandise, the company computerized its inventory years ago and can readily call up both current sales figures and historical sales averages to evaluate product-by-product sales.

But figures can be misleading, Markell says. Historical averaging, for example, may indicate a robust sales average even though an item's current sales evidence a steep decline. "It's a real mistake," he warns, "to let the computer do your thinking for you."

And misleading averages aren't the only caution for businesses using computers to help with inventory. "Counting is a big problem," asserts Cecilia Franklin, owner of Sew Images, a sewing machine and sewing needs store in Piedmont, California. "You just have to take the time to personally count everything in stock. For each item I carry, my computer tells me the cost, date purchased and date sold, as well as how many I have left and when to order more. The computer even sends in the order.

"But how accurate are these numbers? And pilferage is another factor to consider," she continues. "So if I really want to know how many of a given item I have left, I've got to go out there and physically count them."

The larger issue, adds Franklin, echoing Jay Markell, is to determine how much inventory is enough. When first starting her business, and finding that "it's always too much or too little," Franklin adopted a policy on big-ticket items of stocking "one to show, one to go." The policy worked until the day a product she needed was out of stock at her supplier's - prompting her to establish two sources for everything she might need quickly.

"With fast movers," Franklin remarks, "I've learned to anticipate supply with regard to both me and my suppliers. After all, if an item is not there to sell, you can't make money on it."

The experts agree. Business writer John K. Hawks for example, advocating leaner inventories, characterizes inventory as a "notorious cash eater. And it causes all kinds of tax and accounting headaches," he adds. Hawks tells companies to establish an aging schedule for inventory so they can evaluate the size, age and carrying costs of their stock and then "move it out once it has been there beyond your target date."

Similarly, in their book Keys to Starting a Small Business (Barron's Educational Series, Inc., 1991), Joel Siegel and Jae K. Shim set forth a tight-ship approach to inventory management. Discard slow movers, they urge, to reduce carrying costs and improve cash flow. The authors also advise lowering inventory balances, pointing out that inventory carrying costs include not only warehousing but also handling, insurance and possibly spoilage and obsolescence, as well as the opportunity cost of tying up money in inventory rather than putting it to better use. And in developing new inventories, they advocate taking the time to forecast demand item by item and planning orders accordingly.

Siegel and Shim also warn against paring down too far. For if inventory cannot meet demand, forcing you to maintain a high level of outstanding orders, the lag in sales will critically interrupt cash flow. To quantify the impact of this delaying effect, the authors instruct businesses to periodically divide the dollar value of their outstanding orders by their average daily purchases - producing a number called the "lead time in receiving goods." This lead time, they note, must be kept to a minimum.

Finally, Siegel and Shim stress that inventory management cannot operate without complete and accurate inventory records. They recommend basic records that, for each item, indicate the date bought, location, purchase price, date sold and sale price. Given all this information, compiled and summarized, owners can reliably and systematically place their orders - as well as set their prices.

Such information can boost profitability dramatically, states K. Roscoe Davis, professor of production management at the University of Georgia in Athens. By applying the 20-80 principle that 20 percent of your products deliver 80 percent of your profits, you can identify your most active sellers and concentrate on stocking - and marketing - them for the greatest possible return. "A major mistake is trying to manage all products the same way," he claims. "If you look at the amount of time you waste on items that don't move or that move very slowly, you'll see you're losing money."

Complete and well-managed inventory information can also help you compete more successfully with big chains, according to national business consultant Kent Burnes. "Inventory is a drain," he says, "because it's not an asset until it's cash. That's why so many companies need to learn how to control inventory more effectively."

And the most effective inventory control used today, Burnes adds, is the precise item-by-item monitoring pioneered by Wal-Mart and adopted by all the national chains. Such monitoring provides these companies with unprecedented cost efficiency because by tracking up-to-the-minute sales of every item carried, they can exactly match inventory to demand. As a result, they gain maximum cash flow, minimum carrying costs, and minimum lead time.

Burnes strongly recommends that small businesses follow suit by instituting bar-coding or other point-of-sale systems such as a tracking mechanism. The "open to buy" systems now available, he points out, work both with and without computers. They supply daily information, provide quarterly reviews, track pilferage and even suggest when to buy and when not to, based on tracking. They are, concludes Burnes, indispensable.

He also urges businesses to follow up on the spreadsheet data these systems generate by weeding out slow-moving merchandise. Even when these items are sold at a loss, he contends, companies will come out ahead if they use the proceeds to buy new merchandise that sells quickly.

Break through the Limits of Seasonal Sales

No matter how successfully you outwit time through efficient inventory and receivables management, you face an even greater time challenge if you're a seasonal business, locked into a limited sales period.

Extreme seasonality is in fact a prescription for bankruptcy, according to Robert E. Fleury, author of The Small Business Survival Guide (Sourcebooks, Inc., 1992). "The vast majority of business failures stem from a single cause, poor cash management," he states. And of the cash management problems most likely to cause business failures, one of the most common is seasonal cash shortfall.

The reason is this. While all businesses experience seasonal ups and downs, operating below par during certain times of the year, they tend to be back on the upswing by the time bills from the last peak come due. Not so with seasonal ventures. In these companies, which "must in a few months generate sufficient cash to carry their obligations for an entire year," bills from the high season come due just as revenues hit a sharp decline, Fleury asserts. A cash crisis can readily develop, and if there's insufficient cash to cover the bills, bankruptcy may ensue.

Small wonder, then, that Fleury advises seasonal businesses to adopt cash management practices designed to rigorously control spending during the peak season. Likewise he urges caution in borrowing cash against future sales, arguing that such loans are too "easy to get and to feel comfortable with" in advance of a new season.

Moreover, Fleury recommends that companies develop a second-season business designed to limit their slack times to 90 days. Why 90 days? Because that's the grace period in which suppliers normally extend credit despite a customer's outstanding bills. After 90 days, credit on new orders is suspended and "the C.O.D. ax falls."

If Fleury's austerity approach to seasonality is the glass half empty, William D. Bygrave's approach in The Portable MBA in Entrepreneurship (John Wiley & Sons, Inc., 1994) represents the glass half full. To Bygrave, seasonality provides not a risk but an opportunity. His principal advice to cyclical businesses: seize the extremely favorable credit terms available to those who buy goods off- season.

"Suppliers willingly extend normal 30-day terms in the fall in anticipation of the Christmas selling season," he writes. "But many will also offer longer credit terms on orders placed in off-peak periods in order to spread out their production and shipping schedule over most of the year."

In short, cyclical businesses should take advantage of the fact that their own seasonality is reflected all the way down the supply chain. Just as they themselves offer discounts to spur off-season orders, so do their suppliers and in turn their suppliers, ad infinitum.

Although seasonality problems may diminish under the force of stronger cash management, solutions tend to come only through marketing. One obvious marketing solution is to try to maximize sales during your high season. To this end, business writer Carol June proposes year-round marketing.

Before the season, she recommends, stimulate repeat sales by offering special deals on earlybird orders or sending coupons to current customers for their upcoming purchases. After the season, use follow-up mailings or phone calls to stay in touch with customers and encourage their loyalty. Or maintain interest with an off-season or end-of-season sale of leftover merchandise.

Another solution she suggests, as does Robert Fleury, is to establish a second-season business or product line. The easiest shift is to develop a business that follows logically from your current operation and appeals to your current customers. Ski shops, for example, might branch out into camping gear, and holiday fruitcake companies into year-round baked goods. But it's also possible to jump track entirely: a ski lodge could spend the summer as a conference center, for instance, or as a restaurant catering to local residents.

Yet another solution is to encourage or educate customers to use your products or services during more of the year. Not just for Christmas. Not just for office moves. Not just for special occasions. Not just for back-to-school.

In fact, many seasonal businesses adopt a combination of approaches. Richard Kabat, for example, president of Kabat Men's Store, Inc., in Ocean City, New Jersey, has worked to both improve seasonal sales and stretch sales across more months of the year.

"Originally," he recalls, "we did 60 percent of our business in the summer," when Ocean City's population increased tenfold as affluent families from Philadelphia and other nearby cities came to spend their summers along the town's inviting stretch of beach.

Kabat capitalized in two ways on the opportunities afforded by these summer residents. First, though tempted to supplant his quality lines for price points, he stayed with the traditional, quality clothing the summer residents preferred - and maintained his two master tailor shops to fit customers properly. Second, he built a customer list and made extensive use of direct mail - from sale notices and newsletters to a sizable Christmas catalogue - to maintain year-round contact with customers and extend his sales season. The results proved extremely successful.

But then Ocean City started changing. An explosion in shoreline condominiums turned summer residents into year-round weekend dwellers. The rise of Atlantic City, 10 miles north, as the East Coast's major gambling town brought a new population of casino executives to whom Kabat's quality clothing appealed. In a little more than a decade, the local market wholly altered, and fall through spring had become Kabat's high season - accounting for 70 percent of sales.

So would Kabat have done equally well sitting tight till Ocean City changed? Hardly. The dramatic justification of his aggressive efforts is that of the many quality men's clothiers who once thrived in New Jersey, only Kabat's has survived.

An entirely different example of overcoming seasonal constraints is Anita Pagan, general partner of Pagan & Stern Tax and Bookkeeping Services in Berkeley, California. Like all tax preparers, she had long accustomed herself to an intense high season lasting four months and ending abruptly soon after the April 15 filing deadline.

Pagan hit a turning point one tax season, however, when she discovered that although she had acquired as many clients as she could handle, new people - many of them referrals from old clients - were constantly phoning for appointments. "You've got to keep growing your business," Pagan remarks. "But initially I thought my only alternative was to hire another tax preparer, and I was reluctant to do so, feeling that if people are my clients, nobody else should be doing the work on their taxes."

Instead of hiring new staff, she found a creative solution. Taking advantage of filing extensions the IRS allows for all taxpayers, Pagan helped her overflow clients file for extensions and moved them into a second, summertime tax season organized to meet a filing date of August 15. As a result, she not only works personally with all her clients, but has also increased her client base. What's more, through her second wave of tax preparation, she has expanded her high season from four months to eight.

"I needed a way to extend time in order to do more work," explains Pagan. "The filing extensions were always there; I just hadn't utilized them to such an advantage before."

Which all goes to prove that the time boundaries that seem to limit your business may not even be real. So the first step in defying seasonality is to challenge these boundaries, question their assumptions, and then - if feasible - break through them by developing a spinoff, second-season venture or by finding a way to extend your current business over more of the year.

How to Spot Deadbeats and What to Do about Them

You stand a good chance of spotting potential bad accounts when you initially screen companies for creditworthiness. Something in a credit report, trade reference or bank statement (see accompanying article) is likely to provide the tip-off you need.But how do you spot deadbeats among the credit customers you already have? Philip Nadel, president of Cambridge Factors in Boca Raton, Florida, offered the following five telltale signs when interviewed in Entrepreneur magazine:

· Longer-than-usual delays in making payments.

· Excessive returns of products purchased.

· Broken promises to make payment.

· A decrease in new orders.

· Unavailability of company principals when you try to reach them by phone.

The same signs may indicate a customer's anger with you, Nadel points out, so first determine if the customer has grounds for a quarrel. If problems do exist, take action to resolve them -- meanwhile having the customer pay the disputed portion of the bill.

But if your customer is experiencing a financial downturn, says Nadel, "work with the customer as best you can." First get a payment commitment in writing, as well as an immediate partial payment. Then have subsequent payments sent to you by overnight mail -- and call to remind the customer of the payment the day before.

Finally, until the company's finances improve, accept new orders by C.O.D. only.

SIX Surefire Ways to Get Inventory under Control

"The average entrepreneur is trying to juggle 25 balls," observes Dean Kropp, professor of operations and manufacturing management at the Olin School of Business at Washington University in St. Louis. "He or she hardly has time to deal with inventory as well."

The result, all too frequently, is that business owners mismanage inventory. They buy too much or too little. They stop keeping track of what they have. They fail to gauge the short lifespan of fad or seasonal items -- and are unable to sell unused inventory rapidly when demand declines. In effect, they lose inventory control.

So if you can't hire an employee or outside consultant to monitor your inventory for you, advises Kropp, take back control by adopting the following six practices:

1. Restrict access to your inventory or lock it up. Remember that inventory is money, and that pilferage can cut deeply into your profits.

2. Check your inventory frequently against your records. Kropp recommends checking a few items each day, if possible, to see if the number you have on the shelf matches the number you show in your records. Frequent spot checks allow you not only to troubleshoot, but also to avoid the enormous and time-consuming ordeal of doing an annual audit of your entire inventory.

3. Segment your inventory. Concentrate on your fast movers, and reduce the quantity of your slow ones. A traditional rule of thumb is that 20 percent of your stock brings you 80 percent of your profits; so develop a deeper inventory of your more actively-sold items and assess whether the profits you gain from your slow movers justify the amount of money tied up to keep them in stock.

4. Work with your suppliers to trim your inventory and improve its quality. Ask your key suppliers what they can do to reduce lead times on your orders and otherwise improve their service so you can maintain a smaller inventory without sacrificing service to your customers.

5. Measure your inventory performance. Take a hard look at just how well your inventory performs. Review your inventory investment, as represented by its cash value. Assess your inventory service, as measured by the number of times requested items are out of stock. Evaluate inventory efficiency, based on the number of items you can ship on the date requested.

6. Focus your forecasting on the most critical items. The fact is that you can afford to be wrong when you predict demand for certain items and plan your inventory accordingly. With other items, however, mistakes can prove costly. So concentrate your forecasting efforts on the most critical items -- those that demand a high inventory investment, require long lead times and entail high stocking costs.

The Care and Feeding of Seasonal Employees

In many cyclical operations, high season means high anxiety. You've got to handle a lot of business in a short period of time. And you've got to assemble a crackerjack staff that won't quit before the end of the season. How to find, train and supervise such a wonder-crew? Try these well-tested pointers:

· Start looking early. Don't get time-pressured into hiring the wrong people. Instead, give yourself ample time to publicize your openings to likely and desirable seasonal workers such as students, seniors, school teachers on vacation break and workers in seasonal industries that operate at other times of year. Above all, phone or write to your former employees, inviting them to return.

· Be clear about your agreements and put them in writing. People often just don't understand that the job you're offering is truly temporary. So emphasize the temporariness everywhere -- in your ads, interviews and employment agreements. Also be sure to tell applicants about the bad as well as good aspects of the job so they're less likely to quit when the rigors assert themselves. Finally, put your employment agreement in writing, setting out the responsibilities of both employer and employee.

· Provide both initial and on-the-job training. Admittedly, new employees have a lot to learn. So give them the essentials they need at the onset, without overwhelming them, and then offer continual on-the-job training. Ongoing training not only provides employees with information they need, but helps you maintain their interest with new ideas and skills while also boosting motivation.

· Add excitement to prevent burn-out. Keep things interesting. Offer cash bonuses, prizes, perks and incentives to recognize achievement and generate enthusiasm. Give parties or other social get-togethers to ease the tension of work and help build a friendly environment.

· Treat your staff so well they'll want to come back. Do well by your employees and they'll do well by you. That's why treating people with respect and helping them do a good job encourages them to give their top performance. Even more important, it encourages them to return.