Pay on delivery
We collect change order payments at the end of the job. This is because of the market in central Florida and the type of work we do. Our company does a hybrid of remodeling, insurance work, roofing, and new home construction.
Our homeowners are more comfortable with signing a contract and paying after the work is completed. The public considers the construction and roofing industry to be very suspect. Their level of trust grows as you work with them.
Our average project is $10,000. With a figure like that, the work is done so quickly, most of the time you don't need a draw schedule or even a deposit. Because our customers pay the complete invoice at the end of a job, we can't ask them to pay for a change order during the job. For a $10,000 job, we usually have an average change order cost of $750.
We do, however, have specific procedures for a change order. The field personnel must inform the project manager, who draws up a professional and legally binding change order contract that we mail to the client. It includes any additional time the change order will add to the job. We wait for the customer to sign before we begin the work and then add a line item to the final invoice.
Our field crew receives a commission for change orders, so they have an incentive to sell and to make sure the proper paper work is done.
We also have an efficient and assertive bookkeeping department that lets our clients know we expect the final payment within two weeks of sending the invoice.
Pay as you go
We prefer that a customer pay us up front when they sign the change order. First of all, that means less money due at the end of the job. And it makes it more difficult for a homeowner to "renegotiate" the amount at the end.
Secondly, homeowners will sign just about anything during the progress of the job without keeping track of what it is really costing them. By having the customer pay up front, they have a better idea of how much they have spent, and they are not shocked at the completion stage.
Also, it helps with the company's cash flow. If we wait until the end to collect, the customer is basically using our money for additional work.
The written words
Our policy is to have the salesperson fill out the change order in writing and present it directly to the homeowner. The document serves as an extension of their contract, so they must sign it.
There are two instances where we will allow change order payments at the end of the project. We "stage fund" our jobs, which normally require 10% down, two payments of 40% during the job, and 10% at the end. If a homeowner has already gone past what we'd normally expect on their pay schedule, we would ask that the change order payment be due at the next stage -- say, rough inspection. Also, in the cases where we help a homeowner secure financing through one of our approved lenders, we contact the lender to see if the homeowner can be approved for an additional amount before we even go through having them sign the change order.
Father amp; Son Construction