"No one can predict the timing or speed of an economic turnaround, but you want to be ready when it happens," said Adam L. Polakov, CPA and manager in the tax department at Porter Keadle Moore, LLP, an Atlanta-based accounting firm.

"Companies that clean up their balance sheet, reduce debt, shore up their credit lines, and streamline their operations will be more flexible and can move quickly when new opportunities come along. You want to be on as sound a financial footing as possible to be ready for new business." Here's how:

Take advantage of new tax legislation
On Nov. 6, President Barack Obama signed The Worker, Homeownership and Business Assistance Act of 2009.

"The five-year carryback rule was part of this bill, and it is big news for small and midsize companies," said Polakov. "It means that eligible companies with business losses in 2008 and 2009 can now recoup up to 50 percent of the taxes they paid in the prior five years. If a company lost money in 2009, for example, they could recover taxes paid in the years back to 2004."

Congress estimates that the provision could put $33 billion of tax cuts back in the hands of small businesses.

"This piece of legislation can save and add jobs by stimulating small business. We've filed numerous carryback claims for 2008 and expect even more for 2009," Polakov said. "We're advising our clients to file early, file for the carrybacks, and use the infusion of cash to bolster their businesses."

The deferral of taxes on cancellation-of-indebtedness income is another possible tax break that could benefit companies. Signed into law as part of the American Recovery and Reinvestment Act of 2009, it permits taxpayers to defer taxes on income arising from certain repurchases, exchanges or modifications of their outstanding debt in 2009 and 2010.

Staying abreast of new tax legislation can be critical to improving the bottom line and planning for the future.

Streamline your cost structure to cut fat
"There shouldn't be any fat left in organizations in this economy, but if there is, this is the time to analyze and get rid of it," Polakov said. "You shouldn't be afraid to make necessary layoffs or delay bonuses to improve your overhead."

Outstanding debt is a fixed cost that weighs down the bottom line and should be eliminated, if possible. "Interest rates are low right now, so this may be a good time to refinance loans or to buy new equipment," Polakov said.

The extension of the Depreciation Bonus adds incentive to buying new equipment by the end of this year. Companies can deduct 50 percent of the cost of new property instead of capitalizing it over time, thus saving on their 2009 tax bill.

Revamp business development plan
"This is a good time to look at how your business is organized. Many entrepreneurs organize as an LLC for flexibility and decreased liability. An S corporation has some similar advantages and may save a company on payroll taxes. It could pay to switch to an S corporation for tax purposes provided it works from a business standpoint, too," Polakov says.

Resist forging into new territory, Polakov advises. "Too often entrepreneurs panic and want to try something new in a bad economy. You're better off playing to your strengths and bidding work based on the cost of the job, not the price of the competition," he says. "With fierce competition in the marketplace, contractors are bidding 30 to 40 percent less for projects. It's been a 'take any job' environment, leaving companies with razor-thin margins. Any unanticipated cost can turn a break-even project into a disaster."

Being able to accurately estimate work in progress is critical, as lenders want to see a healthy cash flow.

Strengthen financial relationships
"Schedule regular meetings to keep your key financial players --- your accountant, corporate counsel and lenders --- in the loop," Polakov says. "Treat them as valued partners who can help you creatively brainstorm and find solutions for financial problems."

"Interest rates are low right now, so this may be a good time to refinance loans or to buy new equipment," Polakov said. The extension of the Depreciation Bonus in the ARRA adds incentive to buying new equipment by the end of this year. Companies can deduct 50 percent of the cost of new property instead of capitalizing it over time, thus saving on their 2009 tax bill.