Invoice and Change Order Leakage System

Stop 'extra work' creep, prevent invoice surprises, and build a clean approval trail

Run the OperationCoreWorkflow45 min

What you'll accomplish

By implementing this system you will:

  • •Prevent vendors from billing "extra work" without approval
  • •Catch invoice issues before payment (wrong rates, duplicated charges, unapproved work)
  • •Create a repeatable workflow: work order → approval → change order → invoice
  • •Reduce disputes by making rules clear and consistent
  • •Produce a defensible audit trail (who approved what, when, and why)
  • •Turn invoice chaos into a simple weekly routine

Who this is for

  • •Procurement & Ops teams managing service vendors (HVAC, janitorial, landscaping, security, repairs)
  • •Finance/AP teams responsible for invoice approvals
  • •Property/Facilities managers who request and approve work
  • •Anyone tired of surprise charges and "we already did the work" pressure

When to use this

  • •Invoices routinely exceed expectations
  • •Vendors invoice "extra work" with vague descriptions
  • •You can't connect invoices back to approved scope or rates
  • •Change orders are informal (email threads) or nonexistent
  • •People approve invoices because "it's too hard to dispute"

Prerequisites

Quick start (45 minutes)

Start with one messy vendor (the one that causes the most invoice pain).

Create a Change Order Log (Template 1)
Create an Invoice Review Checklist (Template 2)
Send the vendor the "New Billing Rules" email (Template 3)
Set one rule: No extra work billed without a Change Order ID
Run one weekly "Invoice Variance Review" for this vendor (15 minutes)

If you do only this, leakage will drop immediately.

The core rule (plain English)

If it's not in the base scope, it needs a Change Order ID before it can be billed.

This removes ambiguity and eliminates the two most common vendor tactics:

  • • "We already did it, you have to pay."
  • • "It was urgent, so we couldn't wait for approval."

Urgent work is fine. Urgent work still needs documentation and approval.

Step-by-step system

1

Identify your leakage sources

What to do

  • Typical causes:
  • • Base scope unclear ("includes repairs" without limits)
  • • Rates not referenced (wrong labor category, wrong hourly rate)
  • • Pass-throughs without documentation (materials, disposal, fuel)
  • • Duplicate billing (same work billed twice or billed across sites)
  • • Time creep (unusually high hours for routine tasks)
  • • Unapproved extra work

Done looks like

You can name the top 3 leakage patterns for your top vendors

Common mistake

Treating each invoice as "unique." It's usually the same 3–5 patterns.

2

Establish your control points (where approvals must happen)

What to do

  • You need control points before an invoice is paid:
  • 1) Work request created (work order / email / ticket)
  • 2) Scope classification: base scope (included) vs extra work (requires change order)
  • 3) Approval to proceed (for extra work)
  • 4) Change Order issued + ID assigned
  • 5) Invoice must reference the ID

Done looks like

Everyone knows what happens before work starts vs before invoice is approved

Common mistake

Approving after the fact because "it's easier."

3

Standardize what counts as 'base scope'

What to do

  • For each vendor:
  • • write a 1–2 paragraph plain-English base scope summary
  • • list common "extras" that always require change orders
  • • link to the contract/SOW section where base scope and rates live

Done looks like

Any reviewer can decide: included vs extra in under 2 minutes

Common mistake

Base scope is a copy/paste paragraph that doesn't match reality.

4

Implement the Change Order Log (your backbone)

What to do

  • • Every extra work item gets logged
  • • A Change Order ID is assigned before approval
  • • Work cannot start on extras without a "Proceed" approval
  • • Invoice cannot be paid without the ID

Done looks like

A single log that ties work → approval → invoice

Common mistake

Letting vendors "self-approve" by doing the work first.

5

Implement invoice review as a checklist (fast + consistent)

What to do

  • Don't "inspect everything." Run a predictable checklist:
  • • correct vendor, correct site, correct period
  • • base scope items billed correctly
  • • extra work items reference a Change Order ID
  • • rates match pricing exhibit
  • • pass-through has documentation
  • • no duplicates / suspicious patterns

Done looks like

Invoice review takes 5–10 minutes, not 45 minutes

Common mistake

Reviewing invoices ad hoc with no standard rule set.

6

Escalation ladder (how disputes get handled)

What to do

  • Use a simple ladder:
  • 1) Correction request (friendly, factual)
  • 2) Formal dispute (with documentation request)
  • 3) Hold payment on disputed line items
  • 4) Escalate to renewal leverage / leadership

Done looks like

Disputes are consistent and not personal

Common mistake

Paying everything because "we don't want conflict."

7

Weekly variance review (15 minutes)

What to do

  • Set a weekly cadence:
  • • Review the top 5 variances (by $)
  • • Assign reason codes (pricing, scope, duplicate, pass-through, other)
  • • Decide action: approve / partial approve / reject / request documentation
  • • Update Change Order Log and Variance Log

Done looks like

Leakage patterns get eliminated, not repeated

Common mistake

Treating variance review as optional. It's the engine.

Templates included

Template 1 — Change Order Log (spreadsheet columns)

Field
Change Order ID
Vendor
Site
Requested by
Date requested
Base scope or extra?
Description of extra work
Reason
Estimate $
Approval required by
Approved by
Approved date
Status (Requested/Approved/In Progress/Done/Invoiced/Closed)
Invoice #
Invoice date
Amount billed
Notes

Change Order ID format suggestion: CO-YYYY-#### (e.g., CO-2025-0007)

Template 2 — Invoice Review Checklist

Invoice Review Checklist

Basics
- Vendor name matches contract
- Correct site(s) listed
- Correct billing period dates
- Invoice # unique (not duplicate)

Contract + scope
- Base scope items are clearly described
- Rates match pricing exhibit (labor categories, hourly rates, fixed fees)
- Any extra work line items reference a Change Order ID
- If no Change Order ID: reject/hold that line

Pass-throughs (materials, disposal, fuel, etc.)
- Documentation attached (receipts, tickets, weight slips, etc.)
- Markups match contract terms (cap or % if defined)
- No vague "misc materials" without detail

Math + patterns
- Totals reconcile (no math errors)
- No duplicate charges across invoices
- Hours reasonable vs scope
- Unusual spikes flagged

Decision
- Approve full / approve partial / reject / request documentation
- Log variance reason code
- Update Change Order Log with invoice # and amount

Template 3 — Vendor 'New Billing Rules' email

Subject: Billing requirements update — Change Order ID required for extra work

Hi [Vendor contact],

To keep approvals and billing clean, effective immediately:

1) Base scope work should be billed as normal.
2) Any work outside base scope must be approved in advance and assigned a Change Order ID.
3) Invoices must reference the Change Order ID for any extra work line items.
4) Pass-through charges (materials/disposal/fuel/etc.) require documentation attached to the invoice.

Invoices that do not meet these requirements may be partially approved or returned for correction.

Thanks,
[Name]
[Title]

Template 4 — Change Order Request Form (internal or vendor-facing)

Change Order Request

Vendor:
Site:
Date:
Requested by:

Description of additional work (plain English):

Why it is needed:

Is it urgent? (Y/N) If yes, why:

Estimated cost (vendor estimate required):
Proposed schedule/date of work:

Approval:
[ ] Approved to proceed
[ ] Not approved
Approver name:
Approver date:

Assigned Change Order ID:

Template 5 — Disputed charge email

Subject: Invoice [#] — request for correction / documentation

Hi [Name],

We reviewed invoice [#] for [site] and need clarification/correction on the following line items:

- Line item: [description]
  Issue: [no Change Order ID / rate mismatch / missing documentation / duplicate / scope unclear]
  Requested action: [provide docs / correct amount / reissue invoice]

Please respond by [date]. We can approve undisputed amounts while we resolve the disputed items.

Thanks,
[Name]

Template 6 — Weekly variance review agenda (15 minutes)

Weekly Invoice Variance Review (15 minutes)

1) Top variances by $ (5 minutes)
- Invoice #
- Vendor
- Site
- Variance amount
- Suspected cause

2) Actions (7 minutes)
- Approve / partial approve / dispute
- Owner + due date for follow-up

3) Pattern fixes (3 minutes)
- What rule/template needs updating?
- Any vendor retraining needed?

Common pitfalls and edge cases

Common pitfalls

  • •No one wants to be the "bad guy," so rules aren't enforced
  • •Allowing vendors to start extra work without documented approval
  • •Pass-throughs become a profit center due to missing receipts
  • •Invoice reviewers don't have quick access to pricing exhibits
  • •Approving invoices because "it's too hard to dispute"

Edge cases (how to handle)

  • •Emergency work: allow work to proceed, but require a Change Order ID within 24–48 hours and written confirmation of scope/cost
  • •Fixed-fee contracts: change order still applies to work outside scope; define scope boundaries clearly
  • •Multi-site invoices: require site-level breakdowns; reject "portfolio total only" billing
  • •Time-and-materials: enforce labor categories and caps; require daily logs where possible

How to prove impact (simple KPIs)

  • •% invoices referencing Change Order IDs for extra work
  • •$ disputed and corrected before payment
  • •Reduction in variance count over time
  • •Reduction in pass-through charges without documentation
  • •Time-to-review per invoice (should drop as system stabilizes)

Evidence and Confidence

Confidence: High (this is standard operational control for services procurement).

Assumptions: You can enforce the "Change Order ID" rule with Finance/AP support.

Where this can fail: If AP pays invoices without checklist enforcement, or if PMs approve extras informally.

Change log

v1.0 (2026-01): Latest release