With state and federal regulations constantly changing and often difficult to understand, small businesses are at a disadvantage when it comes to compliance. That’s a dangerous position to be in, particularly in the self-storage industry, where many facility operators wear too many hats. If you’re the owner, your main job is to set the vision for the company and empower those who work for and around you to achieve it. Instead, owning self-storage is more complicated than ever.
Outsourcing your weaknesses is sometimes the best way to move your company forward. It allows you to work with experts in other fields, so you can focus on your strengths. When it comes to accounting—auditing, billpay, financial statements, payroll, etc.—you don’t want to fall short. Let’s see how a third-party service provider can help you navigate this side of the business so you can concentrate on your core competencies.
What to Outsource?
Outsourcing your day-to-day accounting can save you time and reduce the risk of employee theft. It should also mean the following tasks get done correctly.
Auditing. While you can and should regularly conduct your own operational audits, it’s helpful to engage an outside auditor once per year to do an in-depth review of your systems and processes. We all become blind to what we see every day, and it’s hard to look at your own company with fresh eyes. I can’t tell you how many times I’ve discovered self-storage units during an audit that weren’t listed in the property-management system, much to the owners’ surprise.
Having an independent third party check your operation annually can provide many benefits. It’ll help you discover new opportunities for revenue growth, feel confident that you have the right systems in place and know procedures are followed. In other words, it’ll help you run your asset in the best way possible.
Billpay. An accounting professional will use a billpay system that allows you to approve or deny all expenses as they come in. The system will have a built-in audit trail, so you can easily see all approvals and pay bills electronically. Your supplier should provide a timeline for when accounting is reconciled and be able to read reports from your self-storage management software.
Financial statements. All income should be derived from the self-storage management system and reconciled through bank statements. This ensures all revenue collected clears the bank. Accurately recording revenue in categories will allow you to see where your money comes from and make it easier to sell your property should you ever wish to exit the business. Income should be divided into rent, late fees, admin fees, merchandise, insurance commission, etc. Sales tax should be appropriately recorded and filed each month.
Payroll. Outsourcing this task ensures your business is following all state guidelines and labor laws. Payroll rules can change, and companies should be proactive in updating clients about new regulations. This can be a lifesaver for a self-storage operator who simply doesn’t have time to stay up to date with every new law. It’s a full-time job.
Starting Your Search
As you begin your search for accounting support, you’ll need to answer these key questions:
Local or national? Do you prefer to work with a local provider or a national one? Local companies tend to know your market better, are able to meet in person, and can have insight a national supplier won’t have. However, you’re also limited in your options. There may not be a self-storage accounting expert in your area, so you’ll have to pick the best fit from what’s available.
National providers usually have more varied experience since they have a broader view, including self-storage knowledge. They can bring insight and ideas from various areas that may work in your market. You’ll have more choices. Outsourcing your accounting to a national company is a simple process if the supplier has technology in place.
Small or large? Smaller companies tend to be more hands-on, relationship-based and focused on personal service. They’ll treat you like a person, not a number. They live and breathe by their customer base, so they’ll typically work harder to make you happy.
Larger companies have more resources and are able to move your account if necessary. They may also save you money, since they can offer discounts and incentives a smaller provider can’t. Of course, that may come as a trade for a less personal customer-service experience.
Person or process? Think about whether you want to work with a person or a process. When outsourcing payroll, for example, it’s easy to pick process. Payroll should be the same each month, and you don’t need anyone’s expertise to do it. It doesn’t need interpretation. Once it’s set up correctly, it’s basically on autopilot.
Other accounting tasks, however, are more hands-on. Recording and reconciling the numbers is the first step. Having an accountant who’s an expert in self-storage adds value, since he should be able to interpret the numbers and tie them to operational strategies for business improvement. You can hire a company that automates accounting and still get reconciled financial statements; however, you’ll have to do the interpretive work to know how to move your business forward.
Cost or benefit? Many owners simply want the lowest cost for the task and overlook the benefit they’ll receive by paying the right person. If a task requires no interpretation, is easily repeatable and can be set in a system, then paying the lowest price makes sense. If you need to talk to someone, get help or have the information explained to you, then you want the benefit of the work, not necessarily the work itself.
For example, preparing a financial statement is relatively systematic. Reading a financial statement and understanding what tasks need to be accomplished during the next quarter to move the numbers in the right direction is the benefit.
Knowing Your Options
As you interview accounting experts, consider the best fit for your business. The cost can vary significantly throughout the industry. You have a couple of options:
A local certified public accountant (CPA) or bookkeeper. Most CPAs can do self-storage bookkeeping, but they may not know the nuances of the management software and business. They likely won’t be able to read your software reports and, thus, won’t know how to interpret the numbers to record everything correctly.
An accounting firm that specializes in self-storage. The right company will have experience in facility operation. Some providers are really software companies that have added bookkeeping to their list of services. Without an operational background, some can only offer you a financial statement; they can’t necessarily help with strategies that will positively affect it. Working with a self-storage expert who also happens to provide accounting and compliance services is a benefit to most owners, since they speak the same operational language.
Anyone handling your bookkeeping shouldn’t just code and reconcile the numbers. They should gather the information from the management software, confirm that your manager is depositing all money received, accurately record sales tax as a liability separate from income, and alert you to problems before they snowball.
Missing deposits, fraudulent credit-card charges, units that disappear from the management system and missing payments from the tenant-insurance company are just some of the issues an outsourced provider can help unearth, not to mention strategic opportunities that could make the business much more money. Your accountant should be well-versed in self-storage, watch your financial back and help make sure everything is correct and accounted for.
Outsourcing your accounting is a personal decision. Think about whether you want to go with a large company that has more resources or a smaller provider that’s more likely to offer a personal touch. It should be the beginning of a long relationship in which you receive more benefits from the service than if you had kept the tasks in-house.
Magen Smith is a co-founder of Atomic Storage Group, a boutique self-storage management company, and owner of Magen Smith CPA, an outsourced accounting firm specializing in self-storage. She’s also a partner in Safe Space Development, which builds self-storage properties. Magen started in the industry as a facility manager and has held nearly every operational role. She has a passion for the industry, helping owners improve their businesses, teaching asset management and conducting self-storage audits. To reach her, e-mail [email protected].