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Embezzlement Alert: Preventing and Detecting Self-Storage Employee Theft

By Matthew Van Horn Comments

The one thing nearly all self-storage owners have in common is a lack of time. They’re often so busy overseeing the top-level aspects of their business that it can be easy to lose sight of what’s happening at the facility level, which can leave them vulnerable to employee theft.

The suggestion that one of their managers could be stealing is almost insulting to some owners. They think, “He’s been working with me for years and I trust him emphatically. I can’t believe anything could be wrong.” Unfortunately, embezzlement can happen at any facility, and it can severely damage the business. Consider the following guidelines to prevent and detect employee theft.

Establish Good Policies

Most storage managers are trustworthy and would never steal from their employer. However, as the saying goes, “Trust, but verify.” Every owner or supervisor should complete a regular financial audit of his facility; but first, you need solid policies and procedures in place.

One of your most important procedures is the one that dictates the way deposits and cash are handled. Deposits should be delivered to the bank daily or as close to daily as possible. Each deposit slip should include a date, money breakdown and time stamp from the bank, which should match up with the end-of-day report generated from your management software. Copies should be forwarded to the accounting team, who should verify the reports and deposits to ensure they match. If there are any discrepancies, a valid reason is necessary.

Next, verify the money in the cash drawer and petty-cash accounts. If your cash drawer starts each day with $200, then at the end of the day, there should be $200 in the drawer plus the day’s deposits. If your property has a petty-cash fund of $200, there should be a mix of cash, receipts or vendor invoices that equal $200.

Remember, petty cash is to be used for approved facility expenses. All receipts or invoices should be in line with your stated policies and procedures. As with day-to-day deposits, there should be a valid reason for any variances.

Conduct a Financial Audit

The most basic way embezzlement takes place is directly from cash sources. Removing funds from cash drawers and petty cash or altering deposits are the easiest ways to steal from a company directly, but they’re also the most obvious places to check when conducting a financial audit. Experienced self-storage managers will embezzle in ways you won’t catch right away. A complete audit will check cash but also the rental side of the equation, including on facility discounts and write-offs.

We all need to accept a hard truth: A full-time manager can spend many hours each week using, testing and learning how to circumvent a property’s management software. There isn’t a program available that can’t be tricked with enough time, patience and ingenuity.

Typically, embezzling behavior starts with some kind of fee. Most storage facilities collect late fees, lien fees, administration fees, lock-cutting fees, etc. These are small amounts most owners or supervisors wouldn’t notice right away, if at all, and they can be targets for someone who understands how your software operates. It’s extremely easy for a manager to accept a cash payment from a customer and then write off the amount or issue a “credit.” The fee disappears into the abyss with a couple mouse clicks.

To combat this, set limits on discounts and write-offs. Review each individually and, if you have a question about it, ask. Once a manager gains a certain amount of confidence, the embezzlement often moves to full rental payments, which can total thousands of dollars per month in lost revenue.

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