You may not realize it, but your building may be hemorrhaging money. Not in the form of disastrous lawsuits or maintenance crises like a collapsed roof or exploded boiler, but in a steady trickle coming from your method of ordering supplies and keeping tabs on small, seemingly inconsequential bills or maybe even theft.
“Waste is a big problem and monitoring how much the staff uses of cleaning supplies is hard to keep track of,” says Michael Rutkowski, president of First Community Management, a management company in Chicago. “You also want to monitor your staff and train them properly to use the right amount of product. They’re always going to want to use more that they are supposed to use because theoretically it makes their job easier. Or if they can get the smell of a cleaning product stronger more people are going to notice that they were cleaning. That’s not necessarily a good use of product.”
“Theft can happen with larger items and it can be very difficult to see,” says Brad L. Schneider CPA, president of CondoCPA in Elmhurst. “Suppose it’s plumbing fixtures to replace toilets or sinks or windows, they look like normal items but they could be taking them and installing them in other places or installing them for residents for free and then asking for money on the side.”
Nickel-and-Dimed to Death
Smaller maintenance items and things like janitorial supplies are usually ordered by a superintendent, building engineer or other authorized building staffer, who may be unaware of what expenses are covered by the building and what is actually the responsibility of the shareholder.
“A way to counteract theft is to have a perpetual inventory system where you have a simple log-in and log-out sheet where you list out the major items, not the small, little things,” says Schneider. “I’m talking about tracking the ins-and-outs of the most expensive items. So if you order five things, you can see where they go and what units they were put into. And managers should review those sheets every so often—maybe quarterly. It’s basically having a little more oversight over the maintenance staff.”