Before conducting a self-storage facility audit, I often ask the owner or manager to send me reports from the management software so I can get a sense of how the facility is performing and identify any opportunities for improvement. I typically have no problem getting the reports, but engaging in a productive discussion on operational issues is another matter. In my experience, far too many operators don’t know how to read and effectively use their management reports.
If you’re using one of the common, up-to-date software systems readily available in the self-storage industry (if you aren’t, why not?), you know there are a plethora of reports available. For some, it may be overwhelming to figure out which are most important. While all of the reports have value, following are six that every owner and manager should be familiar with to more effectively manage his facilities.
Management-Summary Report
The management-summary report is sometimes titled differently depending on the software program, but in essence, it’s a snapshot of what happened yesterday, or so far this week, month and year. It’s the first report anyone involved in the day-to-day operation of a self-storage facility should review. It helps you sharpen focus on potential operational issues and opportunities for improvement.
The summary report indicates a facility’s current financial status—revenue collected, revenue categories, payment types collected, potential rent, actual rent, economic occupancy and other aspects related to the financial standing of the business. It also indicates any non-standard rent totals, rent and fee write-offs, and discounting. When reading this report, it’s important to look for consistency in payment types collected, changes in economic occupancy and the legitimacy of any discounting. It’s also important to look for any exceptions, such as deleted payments, deleted units, changes in square footage and payment reversals.
Also review the unit-status section of the report, which indicates the number of units that are complimentary, rented, reserved, vacant and unrentable. Of particular interest should be units marked with complimentary or unrentable status. Some managers abuse the ability to offer complimentary units, so it’s important to monitor these spaces. Unrentable units should, at some point, become rentable, so management needs to have a plan to return them to active status. If a unit will never be rentable, it should be removed from inventory.
Occupancy-Statistics Report
Another important data set to review is the occupancy-statistics report. This one indicates the various occupancy levels—economic, unit and square footage. It should provide data for each unit type as well as the overall facility. An issue I often find in this report is units are misidentified, or the report is unusable because it’s set up incorrectly. When set up properly, the data can be used to effectively investigate opportunities for unit-size conversion as well as rental-rate increases.
Whoever is reading this report should make sure the total square footage remains constant unless there’s a legitimate reason for it to change. Unless space is added or deleted permanently, the total square footage should remain the same.
Past-Due Worksheet
One of the most important reports that often gets overlooked is the past-due worksheet. We can determine more about the competency of an onsite manager by reviewing this report than almost any other.
This worksheet should be set up so the most severely past-due accounts are listed first. It should also include a review of the tenant ledger to check the manager’s collections efforts. I find far too many managers fail to manage past-due accounts effectively, and owners often neglect to ensure this task is being done as expected.
It’s critically important to review the notes on the past-due ledger to verify the manager’s collections efforts are acceptable. The notes should indicate a regular and systematic contact effort, clear comments about the circumstances of each account, promises to pay with definitive dates and times, immediate follow-up on broken commitments, and confirmation that no past-due accounts are falling through the cracks.
Rate-Variance Report
This is one of the first reports I review when auditing a facility, particularly if the total indicated on the management-summary report is large. Since the summary indicates financial status in terms of net, it’s important to look for instances where tenants are paying rent below the current standard rates. I use this report to look for potential rate-increase opportunities, check complimentary accounts and confirm there’s a signed lease, and ensure managers aren’t harboring any unapproved “friends and family” units.
While there are legitimate reasons for negative, non-standard rate numbers—primarily after your street rates have increased—it’s important to know why tenants are paying less than the standard. Does your manager have to reduce rates to make a sale? Are the “expiring” discount plans not expiring? I often unearth a good deal of potential asset value by reviewing the rate-variance report.
Exceptions Reports
Operators should also learn how to read and use their exceptions reports. While the management-summary report serves as a good first look and provides a synopsis of various aspects and trends, it’s important to review the detailed reports related to exceptions. These show deleted and reversed payments, which must be reviewed and confirmed, as well as any move-in concessions and customer-service rent credits. All exceptions must be researched and confirmed as legitimate because this is the most common way manager theft occurs.
Unit-Status Report
A facility’s unit-status report enables the reader to research and confirm that rented units are actually rented, vacant units are vacant (and clean and rent-ready), complimentary units are legitimate, the manager’s personal unit has a signed lease, and unrentable units are clearly documented with a plan to return to rentable status. It’s also important to ensure reserved units are being processed within the company’s policies and procedures.
More often than not, facility audits show that poorly trained or unmotivated managers don’t manage the facility inventory, which is where almost all of the money to build the location was spent. A great deal of asset value can be lost by this mismanagement. In many cases, it could be better addressed or avoided altogether by effectively using the reports available in the facility’s management software. The smartest operators in the self-storage industry take the time to learn how to read these reports and apply the information to gain a strategic advantage.
Bob Copper is the partner in charge at Self Storage 101, an industry consulting firm that assists facility owner/operators and managers in developing more effective and profitable operational systems. The company also aids in conducting performance reviews and providing the necessary tools to perform at higher levels in a competitive industry. To reach him, call 866.269.1311; e-mail [email protected]; visit www.selfstorage101.com.
