CONSTRUCTION CHANGE ORDER CASH FLOW IMPACT: APPROVED, UNAPPROVED, AND DISPUTED.
Change orders affect cash flow in three distinct ways depending on their status. Unapproved change order work that was performed and never billed is cost with no revenue. Approved change orders with billing lag deploy cost before collection. Disputed change orders may not collect for months. Each mechanism has a specific operational fix, and all three are preventable with the right change order management process.
The contractors who manage change order cash flow well aren't the ones with the fewest change orders. They're the ones running a change order cost code from day one, a weekly submission routine, and a habit of billing approved change orders immediately instead of waiting for the next monthly cut off. None of that takes new software or another hire. It takes one recurring meeting and a rule that any scope the foreman thinks sits outside the contract gets coded separately the same day he sees it.
WHAT IT MEANS.
Change order cash flow impact is the timing difference between when change order cost gets spent and when the change order gets billed and collected, and it works differently depending on whether the change order is unapproved, approved, or disputed.
Change orders that get identified, documented, submitted, approved, and billed on schedule improve job level gross margin. Change orders absorbed into base scope, submitted late, or disputed after the fact reduce it. The discipline of the change order process is a direct determinant of project profitability rather than a billing administrative task, which is why it belongs in the weekly routine and not in the closeout binder.
HOW CHANGE ORDERS DRAIN CASH.
Unapproved change orders: work performed, not billed, not collected
The most common change order cash flow problem is unapproved scope that was performed and never billed. The crew executed the directed work, and the change order was either never submitted or submitted too late to be approved before billing. The cost is in the job cost and the revenue isn't. On a project with $60,000 in unapproved change order scope, that's $60,000 in cost with no corresponding billing event, and the window when the GC is still motivated to approve and pay for it closes the moment the work is complete.
Approved change orders with billing lag
An approved change order with a 30 day billing lag produces the same cash impact as a missed billing cycle on the base contract. The change order gets approved in week two and the next billing cut off is week five, so three weeks of change order cost are deployed before any billing event covers them. On a $40,000 change order at $2,500 a day in incremental cost, a 3 week billing lag means $52,500 in change order costs deployed before the first billing.
Disputed change orders
A disputed change order, meaning scope that was performed, submitted, and then disputed by the GC, is a receivable that may not collect for 6 to 24 months if it goes to dispute resolution. The cost was incurred, the billing was submitted, and the collection is uncertain. Covering that stretch takes line of credit capacity, aggressive collection on undisputed AR to offset it, and a documentation package that makes the claim as clear as it can be made.
THREE STRUCTURAL ACTIONS.
Every project gets a dedicated change order cost code before day one. Any scope the foreman believes sits outside the original contract gets coded there immediately, with no sorting it out later. Later means closeout, and closeout is where unapproved scope goes to die.
Every week, the outstanding change order cost codes get reviewed. Any scope that has been executed and not submitted as a change order gets submitted before the next billing cycle. Your position is strongest before the work is complete, and the weekly review is what makes sure you use that position while you still have it.
Don't wait for the monthly cut off to bill an approved change order. Submit a separate application for the approved amount within 48 hours of approval. That turns a 4 week billing lag into a 2 day billing lag on the same work, with the same GC, at no additional cost to anybody.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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