Using Change Order Reports to Maximize Profitability

Being a contractor can be challenging. You have to manage lots of unpredictable variables and depending on your situation, you might have several projects each with their own subcontractors. It’s a lot to organize.

No matter what, expect to handle change orders; amendments to your original contract that goes outside the original scope of work. Change orders, if poorly done, can be costly.

There are ways to negate the hassle and cost of them though, one of which is the change order report. They’re a great way to maintain organization and control over the project at hand.

The main purpose of using change order reports is to make sure you have an easy way to tell when everything is running smoothly. Furthermore, they also help you maximize your profitability by making sure that you’re not losing money on projects that have gone off the rails.

Let’s explore some ways to use change order reports to leverage your profitability and remove some of the headaches involved with the process. 

Keep Your Change Order Reports Organized

You’ll want a way to easily parse what is going on and what is changing on the job site. This is obviously important to simply make sure everything going on is working as it should, but also to not allow additional costs to get out of hand, and to keep the owner agreeable throughout the process.

Let’s say a change occurred during the construction of an addition to a house. The owner now wants a big bay window on the north wall. This will require some additional cuts of lumber, drywall that’s going to get cut up to fit, the window itself, and of course the extra labor involved. Potentially this also will affect previously planned plumbing and electrical as well. The list goes on.

If you’re not keeping each of these changes organized, to show where and how each cost was accrued a dispute might start up between you and the owner, even if they’re otherwise pretty reasonable. To settle this dispute, you may have to eat some costs, or much worse, deal with it in court. This is what we’re trying to avoid.

You’ll want an organization system that is easy to understand by anyone who is looking at it, within reason. No scratch writing on a notepad that needs to be deciphered, keep it clear and the chances of a disagreement go dramatically down.

Categorize Your Reports

This goes hand-in-hand with organization. Reports in the same category should be ordered chronologically. For example, if you have weekly reports, they should be grouped together by week. If you have monthly reports, they should be grouped together by month.

You should also track which ones have been approved, pending, or completed. 

This way, when you want to find patterns or track progress on a certain topic or project, it will be much easier than if all your reports were mixed up and not categorized in any way. It’ll remove a lot of the frustration that can occur when a lot of changes are going on at once, you can divide things up in a way that is easier for you to keep track of.

The Project Manager

If you know you’ll have change orders, depending on the volume of work, it might be worth investing in a project manager. You might be thinking: how will hiring a manager maximize my profitability?

Remember that a project manager is an investment. It allows you to focus on either running a business or scaling, whether you’re a general, or sub, contractor.

As you scale your business, hiring a project manager to delegate these tasks to can be a big help especially as your projects get larger. This allows you to focus on what’s most important, namely the physical reality of the project at hand. They organize change orders to maximize profitability by identifying which ones will generate more revenue for your company and which ones will cost you money.

Having one person overseeing the change orders, depending on your volume of work, can drastically improve your business as it offers more time for the project manager to review changes that might be overlooked when you feel like you’re juggling too many tasks.

Again, a project manager should be an investment for a busy construction business. This means they are also considered part of the overhead of doing business, and when you’re at this scale you should definitely be incorporating their costs into the total of the project. It can leverage your business to new heights while maximizing your profitability.

Furthermore, even when if you’re dealing with all this yourself without a project manager, you should be incorporating the time and labor it costs you to handle these changes into the new totals. 

Track Changes Easily

So, you have all your change orders documented and you’ve created a system, potentially adding a manager into the mix. Nice work! Now, what do you do with it all? 

You need a system that’ll allow you to put it all together. Tracking each individual step of a change order, in a way that is clear for the client and easy to keep together for you. A software solution can be a huge boon in these aspects.

Trak Changes is what we’re recommending under these criteria. Even with a project manager Trak Changes can help their process along immensely, while also giving the change information to the client directly for them to sign off on.

It’s a powerful tool to streamline your workflow.

With Trak Changes, you don’t have to stress over finding a system to organize your change order system in a way that is digestible for a client. It throws it all out there in an easy-to-understand way. Provide yourself peace of mind and check out Trak Changes to improve your profitability!