If you’ve owned a self-storage facility for any length of time, your site has mostly likely experienced theft in one degree or another. In fact, it might even have been perpetrated by a member of your staff. While most employees are honest and trustworthy, there are those who have every intention of stealing from you. An assault can include embezzlement, merchandise shrinkage, floating of cash, unauthorized credits and even time robbery. Consider the following advice to stop this serious problem at your business.
Why They Steal
First, let’s discuss why employees might steel from your self-storage company. Often, it’s simply because they feel they’re owed more than their compensation package provides. They use some imagined ideal to justify their crime. They also know how much money the business generates and might feel entitled to a bigger share.
Then there are those who believe ownership won’t miss a small amount of money each month. Additional excuses are medical or family emergencies, drug abuse, gambling habits, car repairs, personal spending of petty cash and, of course, simple desire. It can be any of these reasons or a combination that might lead to this kind of crime.
How They Do It
There are many warning signs that employee theft is happening at your self-storage business. They include:
- Excessive credits made to a tenant’s file, especially if the customer paid in cash
- Waived late fees
- Cash not being deposited daily
- Floating of cash (writing a check to take the site’s cash)
- Excessive expenditures of petty cash for personal use
- Missing store inventory such as cleaning products, office supplies or tools
- Retail merchandise shrinkage (locks, boxes or other items)
- Returning company purchases for a refund in cash
These are just a few tactics. Employees who are stealing might also rent self-storage units off the book and pocket the revenue each month.
It’s critical that owners and supervisors conduct regular facility audits to compare the software’s register against rented and vacant units. You also need to be very careful if you’re giving staff access to sensitive areas in the software where manipulation can occur. If you yourself don’t understand the program or how to use it, the manager has the upper hand, so it’s imperative that you be trained. Also, speak with your software provider on how to lock the program if someone attempts to access features for which they aren’t authorized.
If your facility is still operating on a ledger-card system (extremely rare today), change it. It’s far too vulnerable to embezzlement. Today’s storage software makes accounting easier and documents just about every keystroke for review if necessary.
Keep in mind that money and merchandise aren’t the only things that can be stolen from your self-storage business. There’s also time. Any employee who’s getting paid to be on the clock but isn’t actually working is stealing from you. They might be opening the store late, closing early or taking long lunch breaks. They might also be doing personal things while on the site, like texting with friends or watching Netflix.
You should be able to check the employee’s log-in and log-off times. If you have surveillance cameras, you can also view the footage to see when the manager comes and goes. Just make sure no one is tampering with the camera or its digital files. If there’s ever a gap in recording, you probably have a problem. Video is often uploaded to the cloud now, but if you’re still using a digital video recorder, lock it in a metal box so it can’t be turned off or erased.
How to Prevent It
Prevention of employee theft begins with hiring. If you’ve found an ideal candidate, run a background check, then ask and follow up on references, especially if the person has worked for another self-storage company. Many bad employees float from one site to another looking for unsuspecting owners.
Next, you must have a solid operations manual that outlines what’s expected from staff and how business is to be conducted. This eliminates any wiggle room, and they can’t say they didn’t know or weren’t trained on something.
If you aren’t planning to oversee staff yourself, consider hiring an experienced supervisor or third-party management company. If employees are allowed to run amok, the site is almost guaranteed to have issues. A supervisor who knows the self-storage business and all the tricks bad employees use can keep things running smoothly.
Watch your employees’ demeanor. Large luxury purchases, missing work or signs of abuse are red flags. If your gut tells you something is wrong, there’s probably a reason to look into it. You should also add employee-dishonestly coverage to your insurance policy, as this helps cover losses if necessary.
Keep an eye on the cash going in and out of the business. Check the daily deposit slip against the bank report from your management software. Require unit numbers to be noted on each deposit line whether cash, check or money order. This procedure makes it difficult to play with the deposits.
Make sure the company issues a numbered receipt book with carbon copies that can be checked for any transaction, such as receiving auction funds. The receipt should include the customer’s name, address and phone number. Consider adding a sign in the office that states “All cash transactions must receive a computerized receipt. Contact the home office if one isn’t received.”
Check all credit and exception reports for write-offs, especially those in cash. Set a predetermined limit for these in the software, which will shut down the ability if exceeded. Get the manager’s explanations on all write-offs and whether it was a normal part of business, for example an auction or after-hours move-out. These areas are where embezzlement could be occurring.
Finally, talk to your self-storage tenants. They can be a wealth of information. Ask them about their experience with your business and staff. They can elaborate on operational issues such as site cleanliness, office hours or managers with bad attitudes. Place a supervisor contact sign with a phone number outside the front door for customers to call with concerns.
If you’re asleep at the wheel, you’ll wake up to a smaller bank account. I can’t overemphasize how important this is, especially for self-storage sites with large cash deposits at the beginning of the month. The dishonest employee is hoping the owner or supervisor isn’t paying close attention or doesn’t have the time to review daily deposits. When they finally figure it out, the money is already gone.
A key to preventing employee theft is to pay your self-storage staff a fair wage based on the area and create a bonus system that incentivizes them. Visit the store monthly and audit at least quarterly, with at least one visit being unannounced. If there are any concerns, audit monthly, especially before payroll or a holiday.
The best advice is to trust but verify. Be an involved owner/supervisor who knows the facility and its procedures. While this will help, there’s no guarantee theft won’t occur. However, it can often be caught early or push a dishonest employee out before irreparable damage can be done to your self-storage business.
Andrew Kelly Jr. is principal of Sierra Self Storage Consulting LLC, which was founded in 2004 to help new and existing facility operators enhance their return on investment. The company offers brokerage and due-diligence services, consulting for new development, facility audits, owner and staff training, and property management. For more information, call 520.323.6169.