Upturn could bring unforeseen risks for agencies with poor financial infrastructure, warns Spencer Hanlon, global head of travel payments at fintech company Nium
No one deserves this recovery more than the hard-working travel agent community. But could such a boom be a double-edged sword?
In January, our travel agency clients overall saw net sales 700% higher than January 2021. Hallelujah.
But, sadly, there are few businesses that wouldn’t struggle with the financial pressures this creates.
In a normal environment they might find willing creditors, but currently the taps of financial credit are firmly closed for many.
This is particularly the case for the many travel agencies that still operate using traditional credit cards.
Not only are the financing terms and approach of such card providers a little old-fashioned, the technology and tools they provide users with to manage payments are hugely inefficient.
Such businesses, as the once-in-a-lifetime boom of bookings come rolling in, need to ask themselves “could the pressure this places on our working capital destroy our business?”
If the answer to that question makes them nervous, they may actually be left considering turning away bookings – just when they need them most.
If your travel agency business finds itself in such a situation, it’s not too late to act now. But now really is the operative word. Basically, you have to do two things: maximise cash and automate.
By maximising cash I mean do more with less and pay only when payment is due (and not before). Ask yourself, who is responsible for this in our company? If no one has that as a clear task, appoint someone.
When it comes to automation, the right tools and technology will help you to have complete visibility of all transactions – meaning that reconciliations shouldn’t be time-consuming.
This will also allow you to speed up your processes, meaning no more twice-weekly payment schedules.
Proper tools will also make everything much more controllable, empowering you to specify precisely the currency of use, where the transactions can occur, and fix the dates on which transactions can be executed.
If you think you might just make it through this boom and from there on this problem won’t rear its head again, ask yourself this question: what would you do if there is another new wave? Or what would you do if the geopolitical situation in Eastern Europe turns to a conflict and borders close?
Sadly, we’re living through a time of unprecedented volatility in many aspects of our lives.
But the good news is that, with the right planning, your finances needn’t be one of those.