Change Orders in QBO

1) Module HUD

• Module #: 7 / 13
• Time: 15–25 min
• Outcome: “After this, you can handle change orders in QBO so the scope, billing, and job profit all stay readable (and your A/R doesn’t turn into a crime scene).”
• Prereqs: [Module 6 — Progress Billing, Deposits, Retainers]
• Stop here if: you only need a simple, repeatable way to bill change orders as separate invoices and you don’t care about tracking them as a separate revenue stream.
• Level tags used in this module: ✅ Baseline / 🛠️ Operator Upgrade / ⚠️ Advanced

2) Answer Box (snippet block)

• What it is (2 lines)
  A change order workflow that keeps billing clean and reporting trustworthy.
  You’ll bill changes without scrambling invoice history or hiding costs in the wrong place.
• When to use it (2–4 bullets)
  • Scope changed after contract (most jobs)
  • You need a paper trail: what changed, when, and how much
  • You want job profit to reflect change work (not bury it)
  • You want customers to stop arguing about what’s included
• The common mistakeS (1-2 line)
  Burying change order work inside random invoice lines (or worse: verbal-only), then wondering why profit and collections are messy.
• The fixES (1-2 line)
  Use a consistent invoice pattern for change orders, optionally separate income items, and attach costs to the same Project.

3) The mental model (keep short)

• A change order is two things: (1) scope agreement, (2) billing event.
• Keep a repeatable naming convention so you can find them fast.
• You can track CO revenue either:
  • Simple: same income account, clear invoice labeling
  • Cleaner: separate “Change Order” item mapped to a CO income account
• Costs should stay attached to the job container (Project) so job profit stays real.
• Change orders don’t fix underbidding. They only document reality. (Yes, I’m fun at parties.)

4) Do this in QBO (step-by-step)

Choose your path (Start simple → grow)

1. Pick a change order path:
   • ✅ Path A: Separate change order invoice (fast + clean)
   • 🛠️ Path B: Separate change order invoice + dedicated CO item (better reporting)
   • ⚠️ Path C: Change orders tied to estimate/SOV updates (cleanest, most effort)

✅ Path A — Separate invoice + naming discipline (stop after Step 6)

2. Create the CO invoice:
   • Go to + New → Invoice
   • Select the customer
   • (If you use jobs) select the Project
3. Use a consistent CO title in the first line description:
   • CO-01: Add 2 hose bibs (labor + materials)
4. Add line items using your existing Products and services (labor/material/service types)
5. Save and send the invoice
6. Stop here marker:
   If you can search and identify CO invoices instantly, and customers pay them, stop. Reporting upgrades are optional.

Pro tip: Always put the CO number at the start: CO-01, CO-02. Searching becomes stupid-easy.

🛠️ Path B — CO item for cleaner sales reporting (stop after Step 11)

7. Create a dedicated CO sales item:
   • Go to Sales → Products and services → New → Service
   • Name: Change Order
   • Map its Income account to your CO income account (if you created one) or your main income account
8. On the CO invoice:
   • Add one summary line using Change Order for the agreed CO amount
   • Put the CO scope in the description (don’t rely on your memory)
9. Enter job costs normally and attach them to the Project (so job profit reflects the change work)
10. If you want CO profitability later, keep CO costs consistently categorized as job costs
11. Stop here marker:
    If Sales by Product/Service Summary clearly shows CO revenue, stop. That’s the point.

Warning: Don’t use 14 different CO items (CO Plumbing, CO Electrical, etc.). That’s how “simple” dies.

⚠️ Path C — Estimate/SOV update workflow (stop after Step 15)

12. If you’re running estimate-based billing, update the estimate:

• Go to Sales → All sales
• Find the Estimate
• Update scope lines / add CO lines (keep naming consistent: CO-01 ...)

13. Generate the CO invoice from the estimate workflow you’re using (progress/SOV approach)
14. Keep the CO invoice clearly labeled the same way
15. Stop here marker:
    If your estimate/SOV reflects current scope and invoices are generated consistently, stop. This is the cleanest version—also the most maintenance.

5) Real-world example (mandatory)

Job: “123 Pine St – Remodel” (Customer: ABC Builders)

Original contract: $20,000
Change Order #1: Add gas line + shutoff: $1,850

✅ Path A (simple)

• You create Invoice with description line:
  • CO-01: Add gas line + shutoff
• Line items:
  • Labor: $1,200
  • Material: $650
• Customer pays it via Receive payment

🛠️ Path B (clean reporting)

• You create Change Order in Products and services
• CO invoice has one item:
  • Change Order = $1,850
• Costs hit job costs and attach to the same Project
  Result: CO revenue is easy to see in item reports, and job profit stays real.

6) Run this report now (mandatory checkpoint)

• Report name: Sales by Customer Summary
• Filters/settings:
  • Go to Reports
  • Search the report name
  • Date range = this month (or last full month)
  • Click Run report
• What “good” looks like:
  • CO invoices are clearly visible (because they’re separate invoices and labeled CO-##)
  • Customer totals make sense (original contract billing + CO billing)
• What “broken” looks like:
  • CO revenue is hidden inside generic invoices with no labeling
  • You can’t tell which dollars were CO vs base scope
• One fix if broken:
  • Start issuing COs as separate invoices with CO-## labeling going forward. Don’t rewrite history unless it’s worth it.

Note: If you’re using Path B, also run Sales by Product/Service Summary to see CO revenue as its own line.

7) Lab (do it on your file)

• [PASS/FAIL] You chose a CO path (A, B, or C) and wrote it down
• [PASS/FAIL] You created a CO numbering rule (CO-01, CO-02, etc.)
• [PASS/FAIL] You created 1 CO invoice for a real job and labeled it correctly
• [PASS/FAIL] (If using jobs) You attached the CO invoice to the correct Project
• [PASS/FAIL] (Path B) You created a Change Order item in Products and services
• [PASS/FAIL] You received a CO payment using Receive payment (not “random deposit magic”)
• [PASS/FAIL] You ran Sales by Customer Summary and can clearly see CO billing
• [PASS/FAIL] You can find every CO invoice in under 10 seconds by searching “CO-”

8) Knowledge check (3 questions)

1. What’s the simplest clean way to bill a change order in QBO?
2. Why does CO-## labeling matter operationally (not emotionally)?
3. Where should CO costs live so job profit stays real: overhead or job costs on the Project?

9) Next + Related

• Previous: [Module 6 — Progress Billing, Deposits, Retainers]
• Next: [Module 8 — Labor Costing in QBO]
• Related modules (2–3)
  • [Module 5 — Advanced Products & Services (Start simple → grow)]
  • [Module 9 — Enhanced Job Costing & Profit Reporting]
  • [Module 13 — Glossary + Cheatsheets]
• Don’t do this warnings
  • Don’t bury change orders inside base-scope invoices with no labeling. You’re volunteering for disputes.
  • Don’t track CO detail in the Chart of accounts. Keep COA simple; use items and invoice labeling.
  • Don’t do verbal-only change orders and then act surprised when collections get weird.

Fast now = slow forever.

FAQ (short)

Should change orders be separate invoices or added to the original invoice?
Separate invoices are cleaner for tracking, disputes, and collections.

Do I need a separate income account for change orders?
Not required. If you want cleaner reporting, use a Change Order item (and optionally a CO income account). Keep it simple.

How do I track profitability on change orders?
Bill COs as separate invoices, and keep CO costs coded as job costs on the same Project. Profit shows up at the job level.

What if the customer wants COs folded into the next progress bill?
You can, but still label the lines clearly as CO-## so the trail exists. Separate invoice is cleaner, but labeling is non-negotiable.

How many CO items should I have in Products and Services?
One. If you need more detail, use descriptions and consistent CO numbering—not 12 near-duplicate items.

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