The Importance of Audits, Because Trust Is Not Enough
Let it be said that 99% of self storages managers are honest, good-hearted, hard working people. And, as much as you want to trust your management teams, audits are a tool essential to operating a Self Storage facility. Audits are important on various levels; in preventing employee theft, in increasing operational efficiency and in guaranteeing that employees are properly trained to follow policies and procedures.
An audit can be conducted at any time; there is no standard schedule that needs to be followed. If you feel the need to be regimented, then schedule audits quarterly or twice yearly. As in any audit, however, the element of surprise will work to your advantage. A good rule is to audit when there is a manager change. This audit will find any discrepancies left by a previous régime and provide you a clean transition to your new managers. Also, auditing before employee reviews will clarify a management teams’ ability to follow established policy and procedures. Note that the first of the month is hectic for many managers. Auditing during this time would be ineffective as you will not have your staff’s full attention. If your store is on a “1st of the month” pay schedule, I would suggest auditing mid-month. By this time, the store has completed their busy payment period and has followed up delinquencies. Make sure that the management team is present when an audit is conducted. If it is necessary to conduct an audit due to a suspicion of employee theft, an audit with an assistant manager will work. In this case, an assistant might be able to help you to find items that they may have noticed.
Make sure you schedule enough time to complete a full audit. Don’t count the paper clips but do a good, comprehensive audit. What to look for? Just start off with the basics. Count inventory, check cash drawers and make sure leases are available. Pull every lease; compare the name, unit number and rent amount with your operating system. Look for the appropriate addendums and required forms. Catching any variance will alleviate any uncertainty if a customer has become delinquent and has to be auctioned. Go thru bank deposits and credit card settlements.
Be on the watch for inappropriate discounting, as this can be a poorly disguised strategy for theft. Operating software vary; some give the mangers carte blanch, while others allow you to set the perimeters. If the managers are adhering to your policies, it will be proved out in the audit. Inventory seems to be the big trouble maker. If you allow your managers to use a lock or a couple of boxes to hook a tenant, insist that they keep a log documenting free or discounted merchandise. This log can then be used to reconcile the inventory inconsistencies.
Every operating system should supply a rent roll of all current tenants. Print this report and execute a complete walk thru of the property. Checking for locks is a good start, but you must perform a detailed comparison to your rent roll; for a property that is full, this may be all that you can do. On a property that is not full, open all vacant units. You would be shocked to find how often a tenant has over-flowed into the adjacent unit if the vacant units are not kept secured! Opening vacant units will also allow you to see how your managers maintain their property…right back to the procedures of your facility.
The most grievous opportunity for theft is found in the supposed vacant units. It is unfortunately too easy for a manager to rent a unit “under the table” to family or friends. All the unregistered tenant would need is a gate code to have access to the units. On a recent facility audit, we noticed units with locks that indicated a vacancy on the rent roll. When we approached the managers with this discrepancy, they were quick with an answer indicating that the particular special that was running that month was not working properly in the software system. They proceeded to show all the leases they had. Regrettably we took the word of the manager and fixed the error in the operating system. Still feeling unsure about these particular units, we conducted an offsite audit regarding these customers and found out all were previous customers. Now, we do get repeat business, but the probability that that handful were all repeats seemed highly unlikely. We called each tenant and asked a few questions regarding their stay with us and found out that all appreciated our customer service, but this time, did not have the need for storage. Hard lesson learned, but then again, we are back to Trust Is Not ENOUGH!!!
Finally, inventory office and shop equipment. Bring your most current asset list and match serial numbers. If your managers live on the property, inspect the apartment as well.
While audits can sometimes be tedious and time intensive they are undoubtedly effective at understanding how your facility is being managed.