From 20-minute side jobs to multi-thousand dollar scope changes, change orders share a simple common denominator – keep work moving, track the information somewhere and establish a clear proper protocol for approvals.
Here are some of the most common scenarios that we witness on a regular basis.
SCENARIO ONE – “WHILE YOU ARE HERE”
A journeyman is working on a residential kitchen. The home owner asks him if he can take a look at a bathroom light fixture while he is there (you will see this scenario referenced in a few of our articles). It happens all the time and is responsible for millions of dollars in lost revenue every year for the contracting industry. The journeyman agrees to look at it after his lunch break. He spends one hour fixing the light fixture.
The additional work is never tracked or reported. The customer is never billed.
SCENARIO TWO – “WE WANT THAT ADD-ON AFTER-ALL”
This usually a more substantial upgrade where an after-the-fact decision is made that will require additional work. In some of these cases, the labor and materials are actually on hand but approval for additional cost needs to be confirmed before work can proceed.
- Work continues but without noted customer approval. The customer contests the invoice after receiving it. Payment is delayed and/or requires re-negotiation.
- Work that could have proceeded is halted while approval is managed through an inefficient paper-based process. Down-time interrupts momentum and lowers productivity.
SCENARIO THREE – “BACK TO THE DRAWING BOARD”
This represents significant change to the scope of work or even re-quoting of the original job. Estimating will be required, a new schedule will need to be drafted and materials will need to be ordered.
An inefficient administrative process for larger change orders results in slow turnaround, lost details and costly communication oversights between office and field teams. Job efficiency is lost. Billing and payments are delayed.
All of these scenarios and their subsequent problems conspire to attack your most precious asset, your profit margin.
Proper management of change orders in today’s work environment requires the right combination of technology and team training. If you are not able to consider technology yet (don’t wait too long), here are a two simple practices below that will help you tighten up and be more effective managing change orders.
Post Daily Job Notes
Getting your workers to submit daily job notes (see our article that discusses this in greater depth) is one of the most valuable practices you can develop within your company. Even digital post it notes organized by job number are a start. Daily notes will tell your office important things like “completed demo, material delivery was one hour late, and stayed an extra hour to fix bathroom light fixture”. These are the items that frequently get forgotten on a daily basis only to translate into substantial losses over a year’s time.
Scratching your head to remember what happened this week before turning in a weekly time sheet is a commitment to cumulative profit loss.
Empower Field Approval
Create a way for your field teams to obtain change order approval from the field, at least for small-to-medium sized scope changes. Halting work is costly to everyone unless it is absolutely necessary. At the same time, proceeding without approval can be worse when it comes time to bill the customer. If an integrated software solution is currently still out of the question, there are several free phone and tablet based apps that allow team members to obtain digital signatures for self generated documents. A phone call, to the office, a quick write-up a and a quick finger swipe later, you could be back to work and back on track with customer approval intact.
THE 360 SOLUTION
Creating a reliable process for managing change orders was one of our biggest priorities when we started developing 360e. Here’s what we came up with for our customers.
- Workers post daily comments/notes using phones and tablets that auto-index themselves into their appropriate job profiles. These daily comments are visible to billing administrators when invoices are created
- Change orders can be generated by authorized users both in the field and in the office. Customers can approve by signature on any mobile device. The signature is embedded into each change order.
- Approved change orders automatically index themselves in active job profiles and post to work instructions.
- Formal Change Orders can be generated by 360e and submitted via email to customers for traditional signing and remittance.
Efficient and accurate change order management plays a significant role in running a profitable contracting business. While an integrated software solution is your best bet, any deliberate steps you make towards making this process more efficient and reliable will put money back in your pocket and take surprises out of your balance sheet.