$1,000 gone missing...

42 Replies

So here's the story of the missing $1000…

I work currently for a property management company and we have around 300 single family units.  You can imagine that the first of every month is crazy with people bringing in their rental payments and not only that but it means we have lots of cash, money orders, and checks in our office, not necessarily a good thing.

OUR PROCESS

1. The front desk person takes the money and counts it on the front counter right in front of the tenant so the amount is agreed upon.  He then writes a receipt and gives it to the tenant.

2.  He places the tender in an envelope and seals it.  On the front of the envelope he writes the tenant's name, what property address it was for, the date, the amount paid and signs his name as the one who accepted it.

3.  He then places that in a drawer that has a mail slot in it.  This drawer is locked and only two people in the office have the keys, the owner and the book keeper.

4.  The book keeper takes the money out and compares the amount of the tender to the amount written on the front of the envelope.  If they are the same amount he then enters it into our system and it is tracked from there (Appfolio is our rental management software).  He then shreds the envelope.

5.  The moneies are all compiled and a deposit is made.

WHAT HAPPENED?

In April a tenant came in to pay their rent.  She had received some extra money so she decided to pay for three months of rent ($650*3 months = $1950).  She paid $1950 that day ($1000 Money Order, $500 Money Order and $450 Cash) and she has a receipt from our office that shows that's what she paid and we have a copy in our receipt book.  Somehow what got entered into our system was simply the $500 money order and $450 cash = $950.

This month, June, is month three and she received a notice from our company that her whole rent was not paid in May and nothing in June, which of course is not correct.  

We have no idea what happened to the $1000 money order.  You might think, "Well obviously one of them must have stolen it."  The thing is that with the help of the tenant, we have tracked down the money order number that she received from Wal-Mart.  We then contacted Money Gram, the money order issuer, and that $1000 money order has never been processed on their end.  We can make a claim with Money Gram and it is possible that we can still get the $1000 but it will take 60 days before we will know for sure.

WHAT WENT WRONG?

1.  The front desk guy, by his own admission, says that sometimes when it is crazy up front he takes the tender and puts it in his top drawer to help the next tenant in line.  Could it have gotten in a file or fallen down somewhere?  We've turned the office upside down and no sign of it.  He obviously has been told to never do this again.  It goes directly into and envelope and into the drawer.

2.  Did the book keeper misread the amount as only $950 instead of $1950 and miss the other $1000 money order?  Could it have been accidentally shredded?

3. Some other plausible explanation?????

WHAT I WANT TO KNOW

How do you or your company handle taking tenant money?

What are the systems or processes that you use?

What improvements to our systems should we make?

Let me know your thoughts.

I can't think of a better example for the need for an online rental payment system. And I know you're going to say a lot of people don't have access to the internet. But even if only half of them paid online, think of the workload that would cut down.

Your accounting controls seem pretty solid. But I would never, ever accept cash. And I also wouldn't accept multiple forms of payment. One check or money order. That's it.

Good luck!

Originally posted by @Fred Heller :

... And I also wouldn't accept multiple forms of payment. One check or money order. That's it.

...

What do you do when the money order issuer will not issue a money order for more than $1000 but the rent is higher than that?

That is the limit for some money order issuers BTW, and that is probably why the tenant in the OP had more than one money order. 

@Steve Babiak

Really? I did not know that. I guess we really do learn something new every day.

That doesn't seem to be the case with this lady since her rent is $650. I guess in that case, she should have purchased three money orders for $650 each.

I do stand by my "no cash" comment, however.

Thanks

I agree with @Fred Heller regarding your transition to online rent collection. In this internet age you could save time, reduce staff and have less headaches with the implementation of this technology.

I certainly imagine the the types of headaches you have at the beginning of the month with these cash and money order payments from 300 tenants.

A good place to start is www.erentpayment.com. I use it and my tenants love it.

@Fred Heller

At this point we do still take payments in the office. Appfolio does allow for online payments and tenants can even take their cash into 7 Eleven but we don't have one here in our town. Our system is the best we have right now. 

I have to agree with @Fred Heller.  Accepting cash is a big and risky effort, as there are so many ways an error can occur, through process and procedure, and all caused by the mere fact that cash is involved.  These tenants have to receive a paycheck, do they not have a bank checking account?

Seems like a Western Union office should open up in your area!  Cheers.

Is it possible that the money order may have slipped between two boards in the desk?  Just a thought.  Good luck. 

-Cheers.

I would not have the book keeper comparing the actual cash amount to a written figure on the envelope, I would have them compare the actual cash to the receipt log, because the receipt in your tenant's pocket is all that matters in a potential dispute.

Originally posted by @Kenneth Wong :

I have to agree with @Fred Heller.  Accepting cash is a big and risky effort, as there are so many ways an error can occur, through process and procedure, and all caused by the mere fact that cash is involved.  These tenants have to receive a paycheck, do they not have a bank checking account?

Seems like a Western Union office should open up in your area!  Cheers.

 Depending on the socioeconomic level of the tenant, some may not have checking accounts.  I've had a few tenants who cash their paychecks either at their employer's issuing bank and pay a non-member check cashing fee, or at check cashing facilities and pay a check cashing fee there.

If your tenants are all professionals, they all probably have checking accounts.  If you have among your tenants, some employed as construction workers, restaurant workers, mechanics, etc, you likely have some who don't have bank accounts.  

I understand who some landlords may worry about accepting cash.  For me personally, it has never been a problem.  And I've been collecting cash payments for over 20 years.

Sometimes, stuff happens.  Just because a hundred year storm causes a basement to flood does not mean a $30K rental property is a bad investment.  And just because one money order out of thousands of payments collected over many many years was misplaced does not mean an office's collection process is flawed.  The real world isn't perfect.

While I know working with cash is tempting, It is the currency of our country and it must be accepted. There are laws about not accepting cash in Wisconsin and I believe in most other states.

Not accepting cash payment may get you into deep doggie do do.

We definitely have tenants that don't have bank accounts and can not write a check, therefore we have to accept cash or possibly force only money orders. The issue here isn't that cash disappeared but a money order. The perfect scenario is not to take it and force another way but for us that just hasn't seemed very feasible for our tenants. 

@Randy E.

I completely agree with your statements. My boss has been in business for over 25 years and this is the first time anything like this has ever happened. It's like the perfect storm. 

I think your receptionist has that money order and he was waiting to see if he could cash it.

I think you need to write him up.  If you end up having to fire him, you don't want the ding on your unemployment insurance, if he tries to say getting fired wasn't for cause.

And be sure and write up that he admitted to shoving money into his drawer against  policy, and get him to sign it.

Also, change your policy to a "no cash" policy.  This was one of the first things I implemented when I took over management of the building I managed.  I didn't want any cash going through me, just in case.  A couple of the tenants balked, but I told them they must either buy money orders or get a checking account, but absolutely no more cash would be accepted.  I didn't want that responsibility.

Otherwise, you can get all tenants to use an online payment process.

BTW, Walmart has a payment option where they can send the payment straight to you.  I think you may need to provide them with an account number of some kind.  You might want to check that out.

In all fairness, I have had a tenant that paid cash, and rather than deal with that myself, i had set up a bank account for which they would go to the bank and deposit monies into that account.  I could log online and check to see if and when cash was deposited.

I understand that this might not be the case i your region/area, but this was how I dealt with the "non-handing" of cash, allowing the bank to manage that.

Cheers.

This might be a dumb question, but why does the rent have to be due on the first. If you split your tenants in half and had one half pay on the first and the other half on the 15th, you could greatly reduce your stress.

To Thomas: 

The reason you want to have all rents due on the first of the month is to not have to be in court (or hire an attorney) to be in court every single day of the month for tenants who don't pay their rent. 

When you have various due dates, this creates various court dates when tenants don't pay.  Evictions are based on the number of days that Notice to Quit was sent to them.  Since a Notice to Quit is based on a contract due date, you have created multiple due dates, especially with 300 tenants. (So you need to pro-rate rents in order for them all to be due on the first of every month)

Lawyers will give a discount when they only have to go to court one day with multiple evictions taking place from you.

Let's say out of 300 tenants 75 tenants didn't pay their rent.  These 75 tenants were sent a notice to Quit (all rents due on the first) but they still didn't pay.  So, 75 Evictions are filed in court and the lawyer handles all the cases for a discount per tenant eviction.

However, if all 75 tenants who didn't pay had a due date of the 1st, 2nd, 3rd, 4th and a due date of every day of the month, then you would have to pay a lawyer to go to court every single day of the month because you would have evictions every single day of the month.

This is why you always want to have rents due on the first of every month!

My answer to the original poster, put a tracer on the money order, and they will reimburse you for it.  

Many times my tenants have sent me their rent in the form of a money order via the mail and it got lost.  I put a tracer on it and was reimbursed.  However, some people lie that they sent a money order, so I make them pay the rent first, and when I receive payment from the money order tracer, they will be reimbursed.  But in the mean time, rent is due because I don't have it when it is due. 

In your case, the tenant has a receipt, then they would not be required to pay me again.  It would be my fault and I would do everything to make this tenant happy!

Nancy Neville

@Thomas Garza

Thomas, another reason we have all rents due on the first is that many of the properties we manage have mortgages on them and they are typically due by the 10th of each month.  By making the rent due on the first we are able to collect the money, pay all expenses related to the property (mortgage, insurance, etc) and then disburse to our owners their income from the properties by the 10th of the month.  By collecting all rents at the first of the month it is crazy but it is by far the best way to do it, not to mention what @Nancy Neville brought up.  BTW we very seldom have evictions which is a good thing.  Thanks for the input.


Originally posted by @Sue Kelly:

I think your receptionist has that money order and he was waiting to see if he could cash it.

This is the reason you can't find the cash my friend. You have good controls in place so this type of thing can't happen, and yet somehow it has happened. I'm with Sue on this one, I see interference. 

Do you make copies of the checks and money order before you cash it? You should have the front desk make the copies and when she bookkeeper makes the deposit - initially or stamp the copy with the date of the deposit. All the copies get stapled to the deposit slip.

Here is a client's story who lost over $175,000 - a property management company who hired an employee with credit checks and did all the necessary due diligence before hiring. So what went wrong?

- Bookkeeper called in sick and front desk person took the money and flew the coup. 

When the authorities inquired they found out that he was stealing identity. Somehow he would get new identity, credit, license, SSN every week and within two weeks of employment he would steal money. And he would put something so the person in charge would get sick. He was always travelling within 5 states and visited different locations where the communication between authorities were slow. Target was cash businesses and vacation rental management companies. 

- We helped the client with an action plan to streamline their process, put audit trail in place, create a workflow, implemented a procedure where each employee was delegated one step of the process (without the other person knowing that they were been internally audited), and customizing reports and in the end we were hired in being a part time CFO

- They still accept cash, barter, money order, ACH, credit card no Bitcon yet. No payment is accepted after 4:15. Between 4:15 and 4:45 employees would finish their work.

- Daily - the owner checks his reports (5 minutes) before employees leave for the day. It is been 5 months of implementation and they have recovered unbilled charges for $20000.00 to tenants/guests and owners. 

I have so many clients stories that I always shiver at the thought of embezzlement. We never know if the money missing is intentional or an oversight. I hope you get a resolution soon. Please keep us posted.


Gita Faust

Originally posted by @Fred Heller :

I can't think of a better example for the need for an online rental payment system. And I know you're going to say a lot of people don't have access to the internet. But even if only half of them paid online, think of the workload that would cut down.

Your accounting controls seem pretty solid. But I would never, ever accept cash. And I also wouldn't accept multiple forms of payment. One check or money order. That's it.

Good luck!

Does an online payment program exist that does not take a small percentage out of every payment? 

@Nancy Neville

I guess that's why I am on this site! I would have never considered the costs associated with evictions when determining the rent due date. Thanks for the information Nancy. 

Originally posted by @Sue K. :

I think your receptionist has that money order and he was waiting to see if he could cash it.

I think you need to write him up.  If you end up having to fire him, you don't want the ding on your unemployment insurance, if he tries to say getting fired wasn't for cause.

And be sure and write up that he admitted to shoving money into his drawer against  policy, and get him to sign it.

You lack proof.

I'm a certified fraud examiner and unfortunately lots of cases end up like this where all but 2-3 scenarios have been eliminated.

Aaron has good controls and they performed a good investigation.  The uncashed $1,000 money order tells me it got lost or shredded and neither of the employees stole it.

The last thing you want to do is accuse one of your employees, without a shred of evidence, as a couple of posters suggest.  Ready-Fire-Aim is not a good management practice, regardless of the situation.  In this case, I will bet you the MO turns up eventually and, besides, what happens if you falsely accuse or terminate an otherwise good employee?  I promise you the labor law attorney you will be forced to hire will ask for more than $1,000 for his/her retainer just to hear your sad, but indefensible, story.  If an employee (or anyone else) had stolen the MO they would've cashed it immediately before it was discovered missing and a stop-pay issued.  If MoneyGram or whomever are showing that it hasn't been cashed yet, it won't be.  The amount is too small to launch into accusatory mode.  Your dual control & procedures are sound - file a lost MO claim, get reimbursed, and install cameras.  

David Begley, Real Estate Agent in GA (#357208)

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