In construction, change is a way of life. Very rarely does a construction project go from beginning to completion without changes to the original project. The challenge all contractors face is ensuring that when changes in the project do occur, they are properly recorded and billed to the client. Construction firms expose themselves to great risk an efficient method for tracking and billing change orders is not in place. Traditionally, paper was the main way for tracking and billing change orders. With the emergence of construction accounting software, tracking and billing change orders has become much easier.
There are many risks a firm is exposed to due to poor change order management. Some of the downsides are indicated below:
MISSED BILLS
The biggest reason why efficient change order management is crucial is to ensure all work is billed for. While major changes to a project can be accounted for, there may be dozens of smaller items that slip through the cracks. Sometimes when a contractor is performing a job and quickly performs extra work, they may forget to submit a change order all together. The billing office would have no idea that extra work was performed and no bill ever gets sent out. Missed bills can cause serious harm to a business. Contractors absorb the cost of extra work and then bill afterwards. By not billing adequately, the amount of cost the contractor takes on could cause a loss of profit on the job itself.
CLUTTER
There is also the difficulty of maintaining all of the paper associated with change orders. Imagine having to track down a change order from a job 3 years ago? Unless a comprehensive cataloging method is in place, tracking down that change order can prove to be quite tedious.
Construction accounting software provides a central hub for all change orders to be tracked and billed. This is especially important for contractors who have a multiple jobs going on at once. All jobs are managed in the system. When a change order is signed and approved, it is entered into the system. So, contractors no longer have to keep the physical copy stored away. More benefits of change order management are indicated below:
INSTANT JOB AND BILLING
When the change order is uploaded into construction accounting software, the figures are automatically factored into the Job for cost and billing purposes. If the change order has not yet been approved, the amount will not be factored into the Job but still be recorded into the system. Having all of these calculations done instantly save contractors time and ensures accuracy. When the change order is approved, the bill can be sent to the customer, just like any other invoice.
GOING MOBILE
It is one thing to track and bill change orders, but ensuring that all change orders are recorded in the first place is something construction accounting software can do as well. Usually offered with construction accounting software are mobile apps allowing contractors to track change orders in the field. While in the field, the contractor can create a change request, capture the customer signature, and then send the signed slip directly into the system. This ensures that all change orders are both recorded and sent into the system for billing. Also, no paper is required, allowing for change orders to be pulled up instantly.
SUMMARY
Construction accounting software provides contractors with peace of mind that all of the work performed on a job is both properly tracked and billed. By centralizing and integrating information, construction accounting software makes managing easier than ever. The risk is greatly reduced and most importantly, contractors can stay on top of billing so that WIP reports continue to be favorable. Ultimately contractors must do all they can to avoid unnecessary change orders. Firms with a history of completing jobs with multiple change orders make be looked upon as “nickel and diming” customers
About the author:
Eric Goldstein is the president of C/F Data Systems. With over a quarter of a century of experience in the construction software arena, Eric has led C/F Data’s ongoing development of the company’s flagship solution, STRUCTURE. For more information, visit www.cfdatasystems.com.
Modern Contractor Solutions, January 2019
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