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Red Flags: How to Detect and Prevent Employee Theft in Your Self-Storage Operation

Red Flags: How to Detect and Prevent Employee Theft in Your Self-Storage Operation
No self-storage owner likes to think his employees will steal from him, but theft and other bad behavior occur every day. Learn the key areas of your operation to monitor closely and other strategies to deter embezzlement.

If you think employee theft doesn’t happen, think again. Though most staff want to do the best job possible and embezzlement is the furthest thing from their mind, stealing still occurs daily at self-storage facilities nationwide. As an owner or supervisor, it’s imperative that you establish an effective strategy to prevent and identify these incidents.

One of the best deterrents against theft is to ensure employees feel they’re a valuable part of the organization. If you feel ownership in the company you work for, you’re less tempted to steal. But too often, managers feel underpaid or underappreciated. They’re left alone for days, weeks or months on end with minimal supervision. Sometimes there’s temptation to take what they feel they’re owed, particularly if they know there aren’t checks and balances in place.

Red Flags

There are several indicators that theft may be occurring within your self-storage operation. It’s critical that you have ways to monitor and address each. Following is a list of some of the major areas to watch, though I need to stress there are others.

Ghost units. This is when a manager rents a unit to a customer offline and pockets the monthly rental income. One simple solution is to conduct regular walk-throughs and ensure unit locks reconcile with what’s in your management software. Finding a unit that’s marked as unrentable in the system but has a customer lock is a dead giveaway. Also, look for gate codes being used that aren’t assigned to a unit.

Deleted payments. Here’s an example of how this works: A customer makes an in-person payment and gets a receipt. The manager voids the payment, issues a credit for the rent to indicate the account is paid, and then pockets the money. One way to control this is to not allow managers to void payments.

Petty cash. Too often, the box doesn’t get counted. Some managers “borrow” lunch money and then pay it back after payday. Though the employee may see this as harmless, it creates a bad trend that may lead to bigger issues. The solution is a daily reconciling of petty cash. Another is to switch to a prepaid credit or debit card for incidental purchases.

Daily deposits. Make sure your manager takes deposits to the bank daily. One recommendation is to have him scan and email the deposit slip and receipt to you by 2 p.m. to ensure deposits are being made in a timely manner.

Merchandise. Make sure the inventory count is correct in your software. One way to protect against theft is to allow managers to add received merchandise into the system but not to reduce the numbers. Perform a physical inventory count quarterly. This will prevent managers from selling boxes, locks, etc., and pocketing the cash.

Auctioned units. Use an auction company to ensure the total sale amount for each auctioned unit is posted to your management software. This helps remove employee temptation to pocket any proceeds.

Manual receipt books. Each store should have a standard receipt book containing three-part, numbered pages. A simple rule is to mandate that the third page of the receipt is always in the book. If you’re missing a numbered receipt, there’s an issue. This is a really simple process as long as you have a policy for it.

Time theft. This another area that can have a dramatic effect on your self-storage operation. Make sure managers are in the office and actually doing work instead of having a sign on the door and the lights off. Monitoring timesheets and remotely checking camera systems can help eliminate this.

Site Audits

A past employer of mine used to say, “People respect what you inspect!” Another saying to keep in mind is, “Don’t let the fox guard the hen house.” If your self-storage managers know you’re keeping a close watch on certain areas of the business and understand what’s important to you, these things are likely to become important to them as well. Every self-storage operation should have an audit process to ensure the asset is protected. This not only deters theft, it ensures staff are following corporate policies and procedures.

Do you have adequate programs and processes in place to protect against wayward employee behavior? You need an operations manual and employee handbook that outline daily, weekly and monthly manager responsibilities and tasks, and leave no grey areas. Make your expectations crystal clear as well the actions that will occur if they aren’t met.

Audits help ensure all duties are being performed—and correctly. How often you complete your inspections and what you examine are critical to maintaining peak operating performance. How often do you visit each site? Monthly, quarterly, yearly or never? One effective strategy is to show up unannounced rather than schedule visits. For example, have you ever shown up early to see what time staff actually arrive? I never tell my managers where I’ll be or when. Site visits are always unexpected.

A lot of the issues you uncover during a site audit will be related to training and learning issues, not criminal behavior; but occasionally, you may discover an egregious act. This is why you need a system to ensure corrective action or discipline as necessary. If you don’t have an employee write-up system in place, implement one. If you see something wrong, document it and have the responsible team member sign it. Place a copy in his human-resources file. Even if the disciplinary action is a verbal discussion, send an email to create a record.

I learned a long time ago to document everything. That way, if there’s an issue with employee habits or behavior, you have a paper trail. You’ll also be prepared if or when you need to take additional or more serious action.

No owner likes to think his employees will steal, but it happens! Protect yourself. Have clear policies and procedures, and enforce an accountability system for your managers. Making sure everyone is aware of the consequences for bad behavior is a good way to prevent it from occurring.

Jim Mooney Jr. is vice president of operations for Freedom Storage Management. He leverages his 20 years of storage experience to improve the performance of the company’s portfolio of Pennsylvania properties. He was formerly a vice president for Devon Self Storage, where he held various positions. He serves on the Pennsylvania Self Storage Association Board of Directors and has been a speaker at numerous industry events. For more information, call 717.767.2735; email jmooney@freedomstoragemanagement.com.

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