In construction, change orders are a common yet complex aspect that can significantly impact a project’s profitability. As an accounting firm specializing in construction, we understand the challenges and opportunities of managing change orders effectively. Our experience has shown that a well-structured change order process is a necessity and a strategic advantage. This article offers 5 essential tips for streamlining your change order process, designed to help you easily navigate the nuances of change orders, ensuring that every project remains on track and profitable.

5 Tips to Streamline Your Change Order Process for Maximum Profit

1. Mastering the Types of Change Orders

Understanding different change order types is the first step toward a profitable process.

Change orders vary, including fixed price, unpriced, time and materials, and final unit price. Each type demands specific documentation and approval procedures. For example, a fixed price change order should clearly state the agreed-upon price, avoiding future disputes. This approach ensures that each change order is handled accurately, reducing the risk of financial losses.

A solid grasp of each type allows for smoother negotiations and clearer agreements.

2. Prioritize Preconstruction Planning

Preconstruction planning is a cornerstone for minimizing change orders.

Thoroughly reviewing project plans and specifications at the outset can identify potential problems. Suppose a project involves installing a complex HVAC system. In such a case, clarifying all budgetary details beforehand can prevent costly changes later. This initial investment in time and effort saves money and reduces the likelihood of future change orders.

Effective preconstruction planning sets a clear path for project execution.

3. Establish Clear and Consistent Communication

Regular communication is key to managing expectations and preventing misunderstandings.

Establishing clear communication channels with all involved with the project ensures that everyone is informed about its progress and potential issues. For instance, regular meetings with the client can help catch problems early on. This proactive approach keeps everyone aligned and significantly reduces the need for change orders.

4. Integrate Quality Control Throughout the Project

Quality control is not just a checkpoint but a continuous process.

Integrating quality control at every project stage, from budget to design to execution, can identify and resolve issues early. During the design phase, let’s say you catch an error in the material specifications that differs from what was in the budget; correcting it then is far less costly than post-construction. This proactive strategy not only reduces the frequency of change orders but also upholds the project’s quality standards.

5. Document and Review Every Change Meticulously

Detailed documentation of change orders is essential for financial accuracy.

Every change, from labor to material costs, must be documented thoroughly. For instance, if a project requires additional electrical work, documenting the extra hours and materials helps in accurate billing and avoids disputes. This comprehensive record-keeping ensures that every change is accounted for and justified. Accurate documentation is the backbone of a transparent and profitable change order process.

Adopting these strategies can streamline your construction change order process, increasing efficiency and profitability. Remember, every step toward refining this process is a step toward greater financial success. If you’d like more information specific to your construction business and how to maximize your profitability, we’d love to help. Reach out to us today.