How Much Is Bad Debt Costing Minnesota Contractors?

Editor’s Note: This is the first installment in an eight-part series of posts by Bill Gschwind, business and construction attorney and founder of Minnesota Construction Law Services. Bill brings years of experience helping contractors get paid without wasting time, leverage, or sanity.

For owner-operators in construction, unpaid invoices aren’t just a cash flow problem—they’re personal. You did the work. You paid your subs. You kept your end of the bargain. And yet the customer won’t pay, leaving you with a hole in your receivables and a growing sense of frustration.

If this sounds familiar, you’re not alone. Contractor collections is one of the most common issues we handle at Minnesota Construction Law Services. And unfortunately, many contractors are making the same mistake—holding on to bad debt far too long, thinking they’re protecting their bottom line, when they’re actually bleeding it dry.

Let’s walk through why.

Why Contractors Hold On Too Long

Most contractors hesitate to send an unpaid invoice to collections because it feels like a loss. If the customer hasn’t disappeared, there’s still hope, right? Maybe they’re just waiting on financing. Maybe they’re just busy. Maybe a reminder will work.

You’re also busy. Chasing payment means calls, emails, documentation – all while you’re trying to manage your team, bid new jobs, and keep your business moving. And since no one likes playing the enforcer, it’s easy to justify the delay.

But every day you wait, your leverage drops—and your likelihood of recovery drops with it. That’s the hidden cost of bad debt. A skilled Minnesota construction collection lawyer can step in before that leverage disappears.

What That Unpaid Invoice Actually Costs You

Let’s do the math. If you’re owed $15,000 and your average profit margin is 15%, you’ll need to generate $100,000 in new work just to make that up. That’s more materials. More coordination. More hours.

And that assumes the next customer does pay.

This is why we tell our clients: unpaid invoices aren’t just money left on the table. They’re lost opportunities. They’re delayed growth. They’re the reason you’re staying up at night or scrambling to make payroll when you shouldn’t be.

Worse, they push you to take on more work just to fill the hole. And in that scramble, it’s easy to take the wrong job—or underbid just to keep your team busy.

That’s not growth. That’s survival mode. And it’s a slow path to burn out.

The Emotional Cost

This isn’t just numbers on a balance sheet. When you’re the owner, every unpaid invoice hits you personally. You remember the job. You know how hard you worked. You know what you paid out to get it done.

So, when the money doesn’t come in, it feels like a betrayal. That emotional weight can erode your confidence. It can make you second-guess your pricing, your team, your process. It adds mental load to an already heavy job.

And the longer it lingers, the worse it gets.

The Lien Clock Is Ticking

If you’re a contractor in Minnesota, there’s another reason not to wait: mechanics’ lien deadlines. You generally have 120 days from the last day you furnished labor or materials to record your lien. That may sound like plenty of time—but it disappears fast, especially if you’re busy chasing down payment and hoping for a resolution.

And if you miss it? That’s your most powerful leverage gone.

Mechanics’ liens don’t guarantee you’ll get paid, but they’re an essential tool in your collection strategy. They attach your claim to the property. They can survive bankruptcy. They’re often the pressure point that gets things moving.

But they only work if you act early—and correctly.

A Smarter Way to Collect

At Minnesota Construction Law Services, we don’t treat collections like a scare tactic. We don’t send boilerplate letters and hope for the best. We work with you to protect your lien rights, send strategic, legally grounded demands, and preserve your leverage.

We know your world—owner-operator, small office, field work subbed out, managing risk and reputation at the same time. That’s why our approach is professional, not personal. You stay focused on your work, and we take care of the rest.

And because we include collection expense recovery clauses in our contracts, the customer may end up covering our fees, not you.

So, When Should You Hand It Over?

Simple: when it stops being just a late payment and starts affecting your business. If it’s been more than 60 days and your efforts aren’t working, it’s time. If you don’t know your lien deadline, it’s time. If you’re spending mental energy on this invoice instead of building your next project, it’s time.

Handing off the debt doesn’t make you the bad guy. It makes you a professional who expects to be paid.

You don’t have to stop being nice. You just have to stop doing it for free.

“Up Next: Don’t Miss Our Next Blog — 5 Clear Signs It’s Time to Hand Over the Debt. Stay tuned!”

We’ll walk through the red flags that tell you it’s time to stop waiting and start acting—before the leverage is gone.