Changes Get Paid in Advance

Change orders are much more valuable to the customer sooner than later so have them pay in advance for all changes.

I never thought that this subject was one that even needed discussion until I was having lunch recently with a friend who happens to be the real estate broker/partner of a general contractor. 

This friend mentioned that his partner had recently completed a commercial building for a company and was now having a difficult time getting paid for the change orders.  I said, “Why didn’t he get paid upfront for all those changes?” 

My friend was surprised to hear of such a thing.  I told him that I thought that every contractor knew enough to collect for change orders at the time of signing for them.  When you collect your money upfront it ends all the discussion and negotiating at the end of the project.

You see…most of those changes seem much more important and valuable to your customer at the time of the request than at the end of the project.  It is imperative that you get paid right then and there.  If you think that it is difficult to collect in advance for a change order, try collecting for it at the end.

Many, many customers want to have some leverage over you at the end of the project for any number of reasons.   You, as the contractor, have to make sure that they cannot do that.  Therefore you want your last payment to be as small as possible so you are not hurting for the money if they try to play games with you.

Change orders require adjustments in your time, the schedule of the project and increased costs to you so you need to make good money at them.  In general, they should get a higher markup than the overall project; and whatever you do, get paid in advance or refuse to do them.

Please remember to handle this in a friendly and polite manner; but be firm.  Our contracts state right in them that change orders may involve extra costs and those extra costs must be paid in advance.

Tagged as: change orders, customer, payment, project