When Self-Storage Employees Steal: A Guide to Deterrence and Discovery
If you’ve had a self-storage facility for a while, your site has likely been the victim of some degree of theft. In fact, it might even have been perpetrated by a member of your staff. Although most employees are honest and trustworthy, some are out to steal from you. Assault can include embezzlement, loss of merchandise, floating of cash, unauthorized credits, and even theft of time. Consider the following tips to stop this serious problem in your business.
why they fly
First, let’s discuss why employees might run away from your self-storage business. Often, it’s simply because they feel they are owed more than their compensation is offering. They use an imaginary ideal to justify their crime. They also know how much money the company generates and might be entitled to a bigger share.
Then there are those who believe that the property will not miss a small amount of money each month. Additional excuses are medical or family emergencies, drug addiction, gambling, car repairs, personal petty cash expenses, and of course, simple desire. It could be one of these reasons or a combination that could lead to this type of crime.
how they do it
There are many warning signs that employee theft is happening at your self-storage business. They understand:
- Excessive credits made to a tenant’s file, especially if the customer paid cash
- Elimination of late fees
- Cash is not deposited daily
- Cash float (write a check to withdraw cash from the site)
- Petty cash overspending for personal use
- Missing store inventory, such as cleaning supplies, office supplies, or tools
- Loss of retail merchandise (padlocks, boxes or other items)
- Return company purchases for a cash refund
These are just a few tactics. Employees who fly can also rent self-storage units and pocket the earnings each month.
It is essential that owners and supervisors perform regular facility audits to compare the software registry to rented and vacant units. You should also be very careful if you give personnel access to sensitive areas of the software where tampering 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 get trained. Also talk to your software provider about how to lock down the program if someone tries to access features they are not authorized for.
If your installation is still running on a ledger 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 goods aren’t the only things that can be stolen from your self-storage business. There is also time. Any employee who is paid to be clocked in but does not work is stealing from you. They may open the store late, close early, or take long lunch breaks. They can also do personal things on the site, like texting friends or watching Netflix.
You should be able to check the employee’s login and logout times. If you have surveillance cameras, you can also review the footage to see when the manager comes and goes. Just make sure no one tampers with the camera or its digital files. If there is a gap in the recording, you probably have a problem. Video is often uploaded to the cloud now, but if you’re still using a digital video recorder, enclose it in a metal box so it can’t be turned off or erased.
How to prevent it
Preventing employee theft starts with hiring. If you’ve found an ideal candidate, do a background check, then ask for and track references, especially if the person has worked for another self-storage company. Many bad employees float from site to site looking for unsuspecting owners.
Next, you need to have a solid operations manual that outlines what is expected of staff and how business should be conducted. It eliminates any wiggle room, and they can’t say they didn’t know or weren’t trained on something.
If you don’t plan to supervise staff yourself, consider hiring an experienced supervisor or a third-party management company. If employees are allowed to go wild, the site is almost guaranteed to be in trouble. A supervisor who knows the self-storage industry and all the tricks used by bad employees can keep things running smoothly.
Monitor the behavior of your employees. Big 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 dishonest employee coverage to your insurance policy, as this helps cover losses if necessary.
Keep an eye on the money coming in and going out of the business. Compare the daily payment slip with the bank report from your management software. Require unit numbers to be noted on every deposit line, whether cash, check, or money order. This procedure makes it difficult to play with deposits.
Make sure the business issues a numbered receipt book with certified copies that can be verified for any transaction, such as receiving auction funds. The receipt must include the customer’s name, address and telephone number. Consider adding a sign in the office stating “All cash transactions must receive a computerized receipt. Contact head office if you do not receive one.
Check all credit reports and except for write-offs, especially cash ones. Set a pre-determined limit for these in the software, which will shut down the capacity if exceeded. Get the manager’s explanation of any write-offs and whether it was part of normal business, such as an auction or an after-hours move. These areas are where embezzlement could take place.
Finally, talk to your tenants about self-storage. They can be a wealth of information. Ask them about their experience with your company and your 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 if they have a problem.
To stay awake!
If you sleep behind the wheel, you’ll wake up with a smaller bank account. I can’t stress enough how important this is, especially for self-storage sites with large cash deposits at the beginning of the month. The dishonest employee hopes that the owner or supervisor does not pay close attention or have time to review the daily deposits. When they finally find out, the money is already gone.
A key to preventing employee theft is to pay your self-storage staff a fair wage based on area and create a bonus system that incentivizes them. Visit the store monthly and audit at least quarterly, with at least one unannounced visit. If there is a problem, perform a monthly audit, 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. Although it helps, there is no guarantee that a theft will not occur. However, it can often be caught early or kicked out a dishonest employee before irreparable damage can be done to your self-storage business.
Andrew Kelly Jr. is director of Sierra Self Storage Consulting LLC, which was founded in 2004 to help operators of new and existing facilities improve their return on investment. The company offers brokerage and due diligence services, new development advice, facility audits, owner and staff training, and property management. For more information, call 520.323.6169.