I just saw a news article, “Self-Storage Manager Accused of Embezzling $53K From ______ Mini Storage.”
I also remember buying a facility showing $73,000 or so a month in income. During the due diligence period, I couldn’t understand because I was estimating we would get close to $86,000 monthly.
The $86,000 is what we received before our management enhancement program.
Later, I discovered that the previous owner had his bookkeeper arrested, and she was convicted of embezzlement.
Let’s have a conversation on how to set up structures to prevent this from happening to you.
People Are Generally Good
Most people are honest and want to be good people.
At least, that is my belief.
However, I have seen otherwise upstanding people resort to real questionable behaviors when addictions or desperate situations arise.
I think very few people wake up in the morning and think, “Who can I rip off today?”
I have seen people who I thought would never do dishonest things do so when they felt their backs were up against a wall.
Even good people can sometimes “Break Bad.”
So, if you have employees who take payments, it is good to have some procedures and structures in place that can help prevent the “Breaking Bad” Scenario from happening at your facilities.
I am not an expert in loss prevention, but I can tell you some of the procedures we have in place. I learned most of this by reading and working with our CPA’s. Here are some steps and procedures
- Always do a background and criminal background report on anyone you are considering hiring. I am shocked how many don’t. The Seller I was referring to above would have discovered the bookkeeper they hired had been charged before.
- If you take checks and cash at your office, either remote or onsite, and someone else other than you takes them, be really careful how much more they can participate in the reporting process.
What I mean is that our managers take the payments and then close them out in the operating system daily. The money and deposit slip was dropped in a safe. Only I and/or the partner owner had a key to it. In a perfect world, someone else would close out other than the person taking payments.
Then, I would make the deposits a few times a week (or someone else other than the person taking the payments) and then be the one to enter into Quickbooks.
Even when everything looks good, I still ask managers questions about certain customer transactions to let them know I am watching. Questions like, “On the Jones rent, was that a card, or did they pay by check?”
You don’t want the person taking payments, closing the day, and then entering Quickbooks. That is how money can evaporate.
- We lock the operating system so employees can’t waive fees.
If an employee wants to waive a fee or discount over a certain amount on move-in, they have to call an owner, and we do it.
- More and more, Owners are not taking cash or checks, eliminating many potential issues. But for many, we still do, so we set up procedures.
- Owners should periodically, unannounced, do site lock inspections themselves.
My partners or I show up at least once a month and print off the lock inspection report, then go out and do one on our own walk around.
We want to make sure no units have been rented out that are not in the system.
It also lets us know how well the manager or employee keeps up with the operating system regarding what is happening in reality on the project.
I want to make sure every late person over 5 days (or whatever is defined as “late” in your state) is truly overlocked.
- We also have cameras in the offices. This is not necessarily to spy on employees but to deter mischief.
- It is a good idea to periodically work the desk yourself.
One time I was doing this, I had a customer come into the office who was overlocked and tell me they needed to get in their unit. I said, “Well, you need to pay what you owe, and I can remove the lock.”
He said, “No, I just need to get in and get some tools. Here…” and slid a twenty-dollar bill across the desk.
I asked what this was, and he said, “Bob, let me get what I need for work if I pay $20.”
Good information as an Owner to get. Bob was fired.
Conclusion
These are just some procedures and practices we use.
This episode is not meant to be exhaustive or complete but to get you focused on eliminating many easy ways someone can use to pocket your facility’s money.
I would be interested in any procedures you guys may use I haven’t mentioned. Please share below.
For most of us, this is not an issue. My coaching is to have procedures in place to keep it that way. We never know when something may change in the lives of the people who work with us.
Don’t be scared to hire people, but don’t make it easy for someone in a problem period of their lives to “borrow” your money without asking.
Remember, self-storage can be cash machines. Let’s make sure the cash goes where it should go.
