Cash Flow Tip 11 - Managing Change Orders

Managing Change Orders from initiating event through execution, billing, and receipt of payment.

D. Brown Management Profile Picture

A well managed change order process will have a hugely positive impact on customer satisfaction, profitability, and cash flow. A poorly managed process will negatively impact all three and will sometimes impact cash for years if it goes into a claim situation.

Cash Flow: Tip 11 Change Order Management - Identification-to-Payment
  • Map out the change management process, including the specific people who are directly and indirectly involved on each project. The diagram shown is a simple one - expand it in more detail like you did for cash flow. These two processes are interrelated.  
  • Ensure that your contract supports a fair change management process and that everyone on your project team knows what the requirements are.
  • Build relationships at all levels to support the change management process.
  • Make sure your Schedule-of-Values (SOV) can easily integrate change orders from the time they are identified, just so everyone remains on the same page.  
  • Where possible, try to minimize T&M changes because you can’t get them approved and paid ahead of executing the work. Where they are necessary, focus on rapid pricing turnaround and getting them in billings ASAP.  
  • Remember that great negotiating skills will make a huge difference with change management.

More from D. Brown Management
Leadership and Management of Details
Building a great contracting business requires the right balance of leadership and management. While it is possible to separate them the truth is that many of the top leaders are relentlessly disciplined managers.
The Leadership Vibrancy Curve
Leaders must navigate (1) the stages of contractor growth, (2) the phases of management team development, and (3) the arc of their own career and life. Maintaining the right levels of leadership vibrancy leads to sustainable scaling and succession.
Thriving with a Difficult Manager
In the ideal situation, everyone would have a great manager - both internally and externally. In the real world, we will all have to work for someone we consider a difficult manager. Learn to thrive in these situations.