Experienced builders and contractors know all too well how change orders threaten to throw a project off course. From those smaller, more subtle adjustments, to the major overhauls that completely turn plans upside down, change orders represent a natural source of frustration.

Construction pros like you find them a challenge because they impact timelines and, perhaps most importantly, your profits.

Change orders loom larger in today’s landscape of high interest rates, volatile material prices and scarce skilled labor. However, adapting and handling change orders quickly and effectively maintains project efficiency, customer satisfaction and profitability. It means avoiding overspending on unnecessary materials or getting caught without enough workers to get the job done on time.

After all, who needs avoidable problems when you already need more time to focus on meeting client expectations and keeping a healthy bottom line?

The cost of change orders

Unexpected alterations wreak havoc on your project if not well managed and often impact your cost control and profit margins in a major way. Here’s how:

  • Estimate Changes – making unexpected changes to designs, adjusting site plans or switching out materials can completely throw off your initial project estimate. This means you’re left recalculating material, equipment and labor costs, which costs time and money if not properly negotiated with the client.
  • Material Waste – if plans suddenly change, the materials you’ve sourced based on original plans may no longer be needed or fit for purpose. This leaves you with wasted resources that need removing or storing.
  • Labor and Overheads – Handling change orders often ends up increasing project management time, as well as things like admin work and team coordination – all of which impact on the project’s overall costs.
  • Schedule Delays – Bringing in new materials, extending equipment rentals or labor contracts to accommodate changes usually increases costs and causes delays, throwing off your project schedule.
  • Missing Subcontractors – Finding appropriate specialists or subcontractors for a project to accommodate any revised specifications is time-consuming and availability issues often lead to scheduling delays.

How to manage change orders effectively

There’s no doubt change orders challenge your business, but there are ways to manage and minimize their impact. When managed effectively, they can also be the opportunity to deliver even bigger and better projects for clients, helping you boost your reputation and opportunity for return business. Here are a few ways to stay on top:

Document every change

Every little detail matters when tracking change orders, so it’s important to document every alteration request, no matter how small, as well as descriptions, costs and client approvals. A detailed change order provides transparency and clarity and is essential when misunderstandings, disputes or claims crop up down the line. 

Documenting changes also helps track additional costs, as well as assessing the impact on the project schedule. To save time, document in a central place that is easy for your entire team to access. These days, the best construction management software makes digital documentation quick and easy.

Software also keeps customers fully informed about project status. Customer communication software provides a dedicated space for important conversations about changes, schedules and deadlines. The best software allows the client to digital sign and accept bids and change orders, too.

Base changes off your original quote

Having an accurate initial estimate is essential as it serves as the perfect reference point for evaluating any new change requests. Comparing changes in costs to your original quote will help you fully understand the financial impact.

Include margins and overheads

Consider direct costs like materials, equipment and labor but make sure you are maintaining your margins on these. This will help you stay profitable on the job and also provide a safety net for any surprises. Make sure you work in indirect costs, too. 

Think about how changes might affect overheads, including things like admin, utilities and office space. These elements all feed into your bottom line, so they need to be considered carefully.

Get client sign off at every stage

Getting your client’s approval for every change, even if it doesn’t impact the budget, is essential for smooth change order management. It’s not just about finances–it’s about building trust and accountability and having a clear comms chain. 

When clients sign off on a change, it creates a transparent record of project progress, reducing any misunderstandings and clarifying everyone’s understanding of the project scope.

Use software for instant and permanent documentation

With construction management software, you say goodbye to sticky notes or stacks of paper that tend to get lost and transform how you handle change orders. With every alternation request, big or small, you instantly record and document so that your team stays in the loop. 

This not only prevents important details from getting lost but also creates a solid record that often proves valuable later for resolving disputes or answering project questions.

Document changes in real time

With the right software in place, you document any changes in real time, so everyone is kept in the loop and up to date at all times. This makes communication with customers smoother and project management more efficient. 

Documenting changes as they happen means you’ve always got the most up-to-date project details, and having a solid change record also reduces missing information. Instead, you have a streamlined, real-time tracking system that greatly improves project transparency and accountability.

Work change orders into final invoices

Including change orders in your invoices is a vital final step. Make sure invoices detail all the changes that have happened along with their impact on costs. This provides transparency, builds trust, and helps to avoid any unnecessary disputes with clients or subcontractors. It’s also key to keep change order documentation easily accessible for clients to review if needed.

Streamline change orders with software

Change orders don’t need to be a source of frustration for builders and contractors, and if you’re quick to adapt and manage them effectively, you maintain happy clients and healthy profits. 

The right software will help you streamline the whole process from start to finish, keeping projects running smoothly and efficiently, ensuring customers are always kept up to date, and ensuring all important information is well documented and in one place. 

If you’re looking to transform how you manage change orders, book a demo or try a free 14-day free trial with Buildxact. There’s nothing to download or install and no credit card needed.