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When a Good Manager Goes Bad: Protecting Your Self-Storage Investment From Employee Theft

By Linnea Appleby Comments
Continued from page 1

Either way, self-storage always has always been one in which it's relatively easy for manager to creatively (or not) steal. Software and technology do their part to lock down the loopholes and decrease opportunity, but where there’s a will, there’s a way. Once it starts, it rarely ends and can spiral quickly.

Most of the time, theft starts in these common areas. The sooner you catch it the better.

Petty cash or deposits. One of the first places to identify potential theft is through an audit of petty cash and deposits. Money missing from petty cash with or without an IOU is a big red flag. Frequent and unscheduled audits will uncover this quickly. For deposits, verify the amount of cash taken in is the same amount deposited in the bank. Creative managers will pocket the cash and replace it with a bogus check they found in an abandoned unit.

Fee schedule. When you find out the manager is charging for things such as dumpster use, electric charge, after-hours assistance or other fees that are not part of your usual fee schedule, you’ve got theft. Be clear about what your fees are and are not. Establish a policy for taking cash outside the set fees.

Delinquent units. Managers forge relationships with their tenants. They sometimes get caught in the trap of dual alliances, where taking $40 to open a delinquent unit and letting the tenant take out some stuff seems fair and humanitarian. It’s neither for the business owner. It’s theft. If left unchecked, it will grow to a whole new business on the side that you know nothing about. Let your staff know the consequences of this up front.

Short-term or “off-the-books” rentals. If you’re not regularly conducting a full unit audit, your manager knows how long he can get away with letting someone use a unit for cash on the side. If you discover items in vacant units or locks on what should be vacant units, a closer look is needed. Every unit needs to be accounted for at all times. If something seems fishy, investigate until you’re satisfied. If there's nothing going on, there should be a reasonable explanation. Don’t let the manager pull you off track. If there is something going on, he’ll try to divert your attention.

Referral programs, discounts and credits. Ours is a discount-friendly industry with lucrative referral programs. To be effective, managers need to have some autonomy with discount decisions to close the sale. However, if you discover the admin or late fee is waived on cash transactions way more frequently than checks or credit cards, you may have spotted theft. The tenant may be paying it, but you’re not getting it. Also, if you see the same tenant getting a high number of referrals, do some checking. Manager-tenant collusion on referrals is an easy way to quick cash. The tenant gets a $20 rent credit and kicks back $10 to the manager.

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