There are a lot of potential reasons behind a change order. The responsibility can fall on either party if there’s a budget issue or change in the initial plans and sometimes it’s simply nobody’s fault in the case of supply chain problems or unforeseeable weather slowing down work.
Change orders are an inevitability in construction. But they don’t have to be a negative thing. In fact billing a change order properly can end up being a net positive for your bottom line.
Issuing a Change Order
It doesn’t matter the cause: when things change significantly, you’ll need a formal change order.
Of course, a change order may go over easier if the client is the one requesting modifications to the original agreement, but so long as it’s needed to make the job worthwhile for you, due to whatever circumstance, then you should consider issuing a change order invoice.
Document how the scope of work has changed, the costs involved, and any supporting details for the changes and additional time delays.
If the reasoning is reasonable and the client is reasonable this should be more than enough, but you should be showing it all anyways. It’s just the reality of construction jobs.
Invoicing for Change Orders: Tips and Best Practices
Every situation is different, and usually, things go pretty agreeably. But there are some steps to take to make sure everything stays nice and smooth throughout the process.
You’re both under contract, so there shouldn’t be a reason to beat around the bush. Try to create an atmosphere of honesty and communication between you and the client.
This also includes your team and/or subcontractor. You should have a way to easily share information with them that they can review and understand.
What was covered above can help with it, details and documentation, but also using software that communicates any changes that are going on can help.
Be Ready for Changes
Changes can occur really at any given moment, especially in the case of client-side decisions. You’ll want to be making sure that any changes are logged as they occur, or very shortly after, so details aren’t missed.
Be organized and handle it professionally, don’t get frustrated at the news and take it all in stride.
Use documentation to prove your case
Once again this is important no matter the situation. You’re covering your bases just in case there’s a dispute. Anything that shows why things have changed is relevant here. This should include but isn’t limited to: log entries, invoices, purchase orders, email correspondence, architectural sketches, and revisions.
All of this goes back to protecting yourself in the case of a dispute. It doesn’t need to come across as hostile or anything like that, it’s just a matter of fact of what is occurring and you should make sure to have the proof to back it up.
This is separate from communication in that telling someone what is going on versus showing it can be a big difference. You’ll want to be able to easily show exactly where and when these change order costs were accrued
Get Paid ASAP
What ends up being a big change on the construction site may not seem like that big of a deal to the client. This means they might not realize how much the price has changed, and when the bill comes due they might be a bit defensive.
Due to this, you’ll want to let them know the costs and have them at least make a partial payment, ideally the whole thing though that may be unreasonable depending on the size of the contract.
For smaller changes try to get the money right away, if it’s a whole redesign that is going to add a huge amount of money to the situation perhaps work out a percentage or installment upfront.
Don’t wait till the end. Getting paid quickly benefits everyone involved.
Get your client to sign off on the proposed changes.
Getting them to sign off on your change order invoice shouldn’t be a huge issue so long as you’re keeping things clear and professional with them. However, it needs to be stated the importance of this step, as it’s the only way to ensure you’ll be paid once the changes have been listed.
Even if you’re having trouble finding a good time to sit down and go over it all, it’s paramount that the client signs off on everything. Do not continue with costly additions without their written approval.
Using Software to Manage Change Order Invoices
Making sure you have all of this inline whenever there is a change order to be processed, especially when dealing with multiple jobs, can be quite a burden to keep up with. Using software to streamline this process can help out a lot.
You can organize and share invoices as well as any other information, to keep that aforementioned atmosphere of clarity and trust, is a big boon to any contractor.
Trak Changes Can Help
To make sure any change orders are handled in a way that is easy to understand for everyone involved and can help you as the contractor to keep track of things easily and quickly, then Trak Changes may be the solution for you.
All of the above is handled in a simplified interface for both you and the client. AND they can legally sign off on the changes as they occur. It takes a cumbersome process and turns it into something that can actually be useful to your bottom line.
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