Cash Flow Tip 11 - Managing Change Orders

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

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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.

Cash Flow
Great cash flow is a key driver of valuation and successful successions. Running out of cash is is the #1 reason contractors fail. Improving cash flow improves your Return on Equity. Protect yourself and never let cash flow be the limitation to your profitable growth....

Cash Flow
Great cash flow is a key driver of valuation and successful successions. Running out of cash is is the #1 reason contractors fail. Improving cash flow improves your Return on Equity. Protect yourself and never let cash flow be the limitation to your profitable growth....

Evolving Focus with Growth and Leadership Levels
All contractors are built on the same foundation, which starts with the amazing crafts people. With growth in the business, project size, and your level of leadership, the time you allocate to different layers of the pyramid must evolve.
Levels of Improvement: Start with the Foundation
Every process in your business including field productivity will go through three levels of improvement: From predictable to productive to scalable. Trying to skip levels is the surest way to slow down improvements across the company.
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We are Americans. This is the first thing we must focus on as we lead through the many challenges we will face individually, as families, as businesses, and as communities coping with COVID-19 and the very likely financial fall-out that will follow.