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Unpaid Debts Kill IT Small Businesses, Don’t Let Yours Be Next! Steps To Follow

As the owner of a small IT business, you know that innovation, agility, and client relationships are the backbone of your success. You’ve spent countless hours honing your skills, expanding your team, and signing contracts. But even as you keep an eye on the future, there’s a lurking issue that could cripple your enterprise—unpaid debts. According to a study by U.S. Bank, 82% of small businesses fail due to poor cash flow management or poor understanding of cash flow. Unpaid debts are often a significant contributor to this issue.

Failing to manage your accounts receivable can bring a whole host of problems, such as not being able to pay employees or meet your overheads. That’s a death sentence for any small business, but the good news is that it’s preventable.

Here are steps you can take to ensure that unpaid debts don’t spell the end for your small IT firm.

1. Clearly State Payment Terms From The Start

Before you even begin a project, ensure that your client clearly understands the payment terms. This should be in writing, and both parties should agree upon it. Lay out when you expect payment, what forms of payment you accept, and what will happen if payment is late. Clearly stating these terms eliminates the possibility of misunderstandings later on.

Many businesses have adopted the use of electronic contracts to make this process more seamless. For example, on this website, you can find templates and tools that can help you craft legally sound contracts.

2. Automate Invoicing And Reminders

Automation is your friend when it comes to invoicing. Use accounting software that can send out invoices automatically according to the payment terms you’ve established. These systems can also send automated reminders if a payment is coming up or already late. This eliminates the awkwardness of having to remind clients about unpaid bills and ensures you don’t forget to follow up.

3. Offer Multiple Payment Options

Today’s world is increasingly digital, and there’s no reason your payment methods shouldn’t reflect that. Offering multiple payment options such as credit card payments, digital wallets, or bank transfers makes it easier for clients to settle their debts. The less friction there is in the payment process, the faster you’ll get paid.

4. Consider Early Payment Discounts Or Late Fees

Incentivizing prompt payment can go a long way in getting your money on time. Offer small discounts for clients who pay their bills early. Conversely, make it clear that late payments will incur fees. These financial incentives and penalties can serve as effective motivators for prompt payment.

5. Regularly Review Accounts Receivable

review accounts receivable

Make it a habit to regularly review your accounts receivable. Knowing who owes you and how much is crucial for maintaining a healthy cash flow. If an account starts to go too long without payment, you’ll want to address it as soon as possible. Use this information to prioritize your follow-ups and payment reminders.

6. Establish A Collection Procedure

Even with the best of intentions and procedures, you will occasionally encounter clients who are either unwilling or unable to pay. Establish a collection procedure to follow in such cases. This might include sending a formal demand letter, employing a collections agency, or pursuing legal action.

While it’s never pleasant to resort to these measures, having a protocol in place will make the process more straightforward and less stressful.

7. Consult A Financial Advisor

If unpaid debts are becoming a recurrent issue, it might be helpful to consult a financial advisor. They can help you identify any gaps in your current strategy and offer insights on optimizing your invoicing and collection processes.


Running a small IT business is no small feat. You have to manage your team, keep clients happy, and stay ahead of technological advancements. But failing to manage your finances, especially unpaid debts, can stop your growing enterprise in its tracks.

By clearly stating payment terms, automating your invoicing, offering multiple payment options, incentivizing early payments, regularly reviewing your accounts receivable, establishing a collections procedure, and possibly consulting a financial advisor, you can protect your business from the pitfalls of unpaid debts. Your business doesn’t have to become a statistic in the sad tale of small business failures; with proper planning and financial management, you can ensure its longevity and success.


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