Auditing Your Self-Storage Facility: A Checklist for Owners and Operators
|Copyright 2014 by Virgo Publishing.|
|By: Alyssa Quill|
|Posted on: 03/02/2010|
The self-storage industry has the ability to attract and retain some excellent property managers. They love the autonomy, great hours and responsibility provided to them while running a multi-million-dollar business almost on their own. Luckily, most of the great managers we find stick around.
However, we’ve all heard the horror stories—and many of us have experienced them—about the self-storage owner who completely trusted his employee only to discover the manager had been stealing from the company. Ouch! Employee dishonesty hurts. But it does happen, and it’s one of the reasons completing frequent audits of your facility is important.
It’s not the only reason, though. We’ve all read articles about the self-storage facility that sold the goods of a paying customer by mistake because it had them listed in the computer as renting a different unit number. Honest mistakes, misunderstandings, poor training, tunnel vision, software bugs, and normal wear and tear can cause issues to arise at a storage facility. Without completing property audits, those issues can fester for months and become costly. Here’s a recommended list of items to include in your facility audit, and why they’re important.
Here’s one example of mishandling cash: You have an incredibly honest property manager, but he’s not great at giving people the right amount of change. He’s been pulling money out of the petty-cash drawer at the end of the day to fill the shortfalls in the change drawer. An honest mistake, but it can add up if not addressed quickly.
Another scenario could be one in which a property manager is short in her own bank account. She spends most of her time alone at your facility—with access to your cash. She’s a good person, but behind on her bills. She promises herself she’ll pay back the money she borrowed from the cash drawer as soon as she gets her next paycheck. Then, nobody notices. She tries again, and nobody notices. It’s almost too easy—a no-interest loan or paycheck advance.
To avoid these situations, audit your facility’s cash drawers monthly—or, at the very least, quarterly—against your daily transaction reports and petty-cash receipts. If there’s any discrepancy, there had better be a good explanation. If you’ve given your manager a form or tool to balance the cash at the end of each day, look at the past several weeks to make sure it’s being used.
Every week, self-storage managers should conduct detailed lock checks, comparing the locks on every unit to a list generated by your facility’s management software. The purpose is to make sure units that are supposed to be vacant are in fact empty, units that are supposed to be rented have a tenant’s lock on them, and units that are past-due are handled appropriately.
Managers should walk through the facility a couple times a day, checking locks and ensuring the facility is maintaining a clean, safe, well-lit appearance. Any unit without a lock should be addressed immediately. Overlocks should be placed for past-due tenants.
During your facility audit, a complete, detailed lock check should be conducted, and owners or supervisors should ensure the manager is doing weekly and daily walk-throughs and addressing any maintenance issues. Also make sure managers are moving tenants out of the computer system when they actually leave the property and not inflating your occupancy or rental income, which you’ll just have to write off later (after dealing with an angry customer who’s still being billed months after he’s moved out).
Owners should review several new leases (those signed during the last two months) and older leases, too. Any critical information missing from tenants’ files could be a major liability for you in the future if anything goes wrong or you need to auction the unit. Things to look for include:
Other Office Activity
This is a great opportunity to follow up on your manager’s activities regarding lead follow-up and marketing. Check to make sure a good system is in place to track and follow up with potential customers. Discuss the marketing plan and make sure the necessary marketing tools are available. Double check your website to ensure it’s up-to-date and accurate.
You probably already have written procedures in case the computer goes down, and you need to audit those as well. Any manual receipt books should be analyzed during a property audit. Make sure you compare every manual receipt created since your last audit to the records in the digital and paper tenant files. You may want to call a few of the tenants who received manual receipts to verify their transactions.
Some owners have found managers using manual receipts for customers paying with cash, but then applying promotions in the computer and pocketing some of the cash. A quick call to the customer will bring those situations to light. If your software allows managers to make negative billings or delete billings, you’ll want to review all those transactions as well to ensure they occurred for legitimate reasons.
A good facility audit should also address manager reporting, including timesheets. Do the hours on the timesheet reflect the actual hours worked by the manager? Comparing timesheets to security-system logs, transaction times in the computer, or video surveillance will alleviate any problems.
If you sell locks, boxes, tape, etc., a facility audit is a great time to verify and track your inventory and check your pricing. Make any revisions to your display that might help you increase sales.
Self-storage managers look at the same things every day, and sometimes it’s hard to see the property’s faults. A facility audit is a great time to come in and look at everything with a fresh perspective, through a customer’s eyes, or even through a potential buyer. Here’s a short checklist:
Spending a full day every couple of months on the items listed above has proven to be well worth the time for any owner. Make a day of it, get to know the manager better, and take the time to train him when issues arise. If you don’t have the time to do it yourself, hire a consultant to do it for you. Following up on the items addressed in proactive facility audits will help you increase revenue, decrease expenses, reduce your liability and grow the value of your facility.
Alyssa Quill is vice president of Investment Real Estate Management in York, Pa. She has worked in the self-storage industry for nine years in finance and operations roles. Investment Real Estate LLC provides self-storage brokerage, construction and management services to owners and investors in the Mid-Atlantic and Northeastern United States. For more information, call 717.779.0804; visit www.irellc.com.