Best Practices
By Phazahn Odom | Founder of Phixmo | Former bookkeeper for residential GCs | Former NFL tight end, Pittsburgh Steelers
After years of doing the books for residential GCs, I can tell you the single biggest source of lost margin: undocumented change orders. The homeowner asks for something extra, the crew does it, nobody writes it up, and that money is gone. It happens 10 to 15 times on a typical remodel.
This guide covers how to handle change orders the right way so the work you do is the work you get paid for.
A documented modification to the original scope of work, with an agreed-upon cost adjustment.
When the homeowner asks for something that wasn't in the original contract (an extra outlet, a different tile, an additional feature), that's a change to the scope. A change order documents what's being added, what it costs, and gets the customer's agreement before the work proceeds.
The key phrase is "before the work proceeds." A change order that's documented after the work is done is just a hopeful invoice. A change order approved before the work is a binding agreement.
Three common failures, all of which cost real money.
The homeowner says "sure, go ahead and add that outlet" and the crew does it. No documentation, no agreed cost. When the invoice arrives, the homeowner disputes the charge or claims they didn't realize it cost extra. You either eat the cost or damage the relationship fighting over it.
The GC means to document the change but gets busy on the job site. The work gets done, the change order never gets written, and at the end of the project there's $4,000 of extra work that was never billed because nobody tracked it.
Small changes feel too minor to formalize. An extra outlet here, a shelf there, a slightly different fixture. Each one is $200 to $500, so each feels not worth the paperwork. But 12 of them across a project is $3,000 to $6,000 in unbilled work.
The pattern is always the same: the work happens, the documentation doesn't, and the money disappears.
Six practices that protect your margin.
The $200 changes are the ones that add up. Make documenting a change order fast enough that even small ones get written up. If it takes 30 seconds, you'll do it. If it takes 15 minutes, you won't.
This is the most important rule. The customer must agree to the scope and cost before the crew does the work. Approval after the fact is not approval, it's a request for payment that can be denied.
Every change order should state the cost clearly. "Add a recessed light in the hallway: $185." No ambiguity about what it costs.
The faster and easier it is for the homeowner to approve, the faster the work can proceed. A change order they can approve from their phone in 30 seconds keeps the project moving. A change order that requires a meeting or a signed paper form creates delays.
Every change order, with its approval, date, and cost, should be recorded and accessible. If there's ever a dispute, the record settles it.
Never invoice for a change order the customer hasn't approved. It leads to disputes and damages trust. Only bill for documented, approved changes.
A clean change order process has four steps.
The homeowner requests something outside the original scope, or an unforeseen condition requires additional work.
Write up what's changing and what it costs. Be specific.
Send it to the customer. They approve or ask questions. Work doesn't start until they approve.
Once the approved work is done, invoice for it. Because it was approved upfront, the invoice is expected and gets paid.
The discipline is in step 3. The temptation is to do the work first because the crew is right there and it's easy. But that's exactly where the money leaks. Approval first, work second.
The right tool makes the best practices automatic.
A good change order system lets you document a change in under a minute, send it to the customer for approval with one click, and prevents you from invoicing until the customer has approved. It keeps a complete record with timestamps automatically.
This is exactly how Phixmo's change order workflow works. You create the change order, send it to the customer through their portal or email, they approve from their phone, and only then can you invoice. The system enforces approval-before-billing, so the most important best practice happens automatically. Every change order is documented, dated, and recorded.
When documenting a change takes 30 seconds and the approval comes back from the customer's phone in minutes, even the small $200 changes get captured. That's the difference between billing all your work and losing thousands to undocumented extras.
The math is worth seeing.
A $180,000 kitchen remodel at a 12% margin means $21,600 in expected profit. During the project, the homeowner makes 12 change requests averaging $450 each. That's $5,400 in additional work.
If those changes aren't documented and billed, the $5,400 comes straight out of your margin. Your profit drops from $21,600 to $16,200. Your effective margin falls from 12% to 9%.
$5,400
lost per project
12% to 9%
effective margin
$54,000
per year across 10 jobs
Across 10 projects a year, that's $54,000 in earned revenue that was never collected. For a small residential GC, that's a salary, a truck, or the difference between a good year and a tight one.
The work was done. The only thing missing was the documentation and the approval. Get those right, track it against the budget with job costing, and the $54,000 stays in your pocket.
Phixmo documents a change in under a minute, gets customer approval from their phone, and won't let you invoice until it's approved. Field workers are always free.
Yes. The small changes are the ones that add up. A $200 change feels too minor to formalize, but 12 of them is $2,400. Document every change, no matter how small.
Make the approval fast. With a system that lets the customer approve from their phone in seconds, you can get approval and still start quickly. The key is that approval comes first, even if it's just minutes before the work.
A verbal agreement is hard to enforce and easy to dispute. A documented change order with the customer's approval, a timestamp, and a clear cost is far stronger protection.
If you have a documented approval with a timestamp, you have strong evidence of agreement. This is exactly why documenting and getting approval upfront matters.
Use a system built for it. Phixmo lets you document a change in under a minute and get customer approval from their phone, so even small changes get captured without slowing down the job.