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Should I Do an Operational Audit of My Storage Facility?

November 1, 2018

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4 min

StoragePug is a modern marketing company for self storage.

At the beginning of this month, the StoragePug team attended the TNSSA Annual Legal Seminar and Conference.

Cynthia Ashby of Dynamic Storage Solutions did an educational session on auditing your facility, and her key point stuck: "You cannot expect what you do not inspect."

The best operational thing you can do for your storage business is to set expectations for yourself and your team – and meet them.

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To succeed, you must measure the degree of success and iteratively make changes to meet and exceed your goals.

What an Operational Audit Is

An operational audit is an examination of how an organization conducts business, and the objective is pointing out improvements that will increase its efficiency and effectiveness.

Inspections are essential for the health of your business because of a lack of efficiency and efficacy typically translates to fewer sales or increased operational costs. It which could mean the inability of your self storage facility to compete. 

Other objectives are to understand the risks and the responsibilities of your business, find opportunities for improvement, and help upper management understand what is going on at the facility.

What an Operational Audit Isn't

It is essential to start by writing out jobs descriptions or creating a handbook enumerating all procedures and policies, make financial goals, and keep consistent communication with your managers. However, it isn't helpful if you stop there.

When to Audit

Operational Audits are a continuous process.

It is best if you perform audits regularly and without notice. Other times to perform inspections are when you see red flags or have changes in staff.

You want your self storage property to be as efficient as possible. You don’t want to discover problems years down the road when it would have only taken a small amount of time to check.

Being extremely thorough takes time, so the depth of each inspection should vary for sanity's sake.

Benefits

How do you set goals for your property if you don't have an idea of the current situation? 

An operational audit will help you understand what is going on in concrete terms and help you make adjustments to your business to meet those goals. 

Audits should also be reviewed with your on-site management team to help them understand their roles in affecting profitability. Reviewing with the on-site management will also help to create accountability. 

Another benefit of an operational audit is that it can reduce your risks. For example, during the examination, you will see that tenant files are squared away, including signed contracts for all rented units, a paper trail of proper notifications of delinquencies, and cash isn't getting "lost."

Operational audits can identify theft. “Trust but verify,” as the saying goes. Most managers are good employees, but theft happens.

For example, an audit of the petty cash drawer will reveal if a manager is using it as a payday advance to pay for personal items.

There may be occupied units with locks on but that do not have a signed lease on file, meaning the manager is selling space and pocketing the rental income.

An audit can increase the effectiveness of day to day operations and economic efficiency. It can be used to identify areas of improvement. For example, the audit could reveal that all of your 5x10 units are 100% occupied. 

You could then see that your managers have many inquiries for that size of the unit and even have a few people on the waiting list. This information will help you make some changes. The first thing you should do is raise your rate on that size, thereby increasing your economic occupancy

Increasing economic occupancy is the best way to help not only your bottom line but increase your asset value.

Items included in an operational audit:

  1. Ask your managers how you can make their job easier 
  2. Count petty cash 
  3. Count inventory and supplies 
  4. Unit inventory 
  5. Make sure unoccupied units have no items within 
  6. Make sure rented units have tenants’ locks on them 
  7. Check unrented or damaged units 
  8. Make sure every unit with a lock is actually occupied in your system and paid for 
  9. Deposits and credit card reports 
  10. Review client files 
  11. Copy of ID 
  12. Completed, signed, up-to-date lease 
  13. Make sure your lease is updated at least annually 
  14. Accurate data on the contract, including unit number, price, name, address, military status, emergency contacts and signatures 
  15. Autopay forms 
  16. Completed and signed insurance agreement 
  17. Appropriate late and lien notices 
  18. Info matches in property management system 
  19. Review of “past due” tenants 
  20. Look for variations in reports 
  21. Inspect onsite office and apartment, if there is one 
  22. Review why some units are not rent ready 
  23. Landscaping 
  24. Wall, doors, floors, gate- note any damages or repairs needed
  25. Alarm systems 
  26. Lighting 
  27. Elevators 
  28. Clean, no dumped items lying around 
  29. No long extension cords that tenants could trip over 
  30. No other hazards 
  31. ADA standards
  32. Any fees waived 
  33. Competition, pricing 
  34. Customer complaints and online reviews 
  35. Make sure managers are doing weekly walkthroughs 
  36. Manual receipts
  37. Time clock 
  38. Log in and log out timestamps 
  39. Business practices 
  40. Marketing goals
  41. Website 
  42. Equipment such as office computer, printer, golf cart, or tools 
  43. Variance reports (make sure rates are somewhat uniform across your tenants) 
  44. Occupancy history reports (know when to raise prices and your peak times for certain unit types)

Conclusion

If you are not doing an operational audit, you are not running your facility efficiently. The examination will help you understand the current status of your business and help you achieve your goals. It will also help you be aware of problems.

You can use an operational audit to improve your business, which will, in turn, make it more profitable. 

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