Accounting & Finance processes in the travel industry can be very different compared to other sectors. Whether you are a start-up, growing, or established travel enterprise, you need to keep accurate accounting records when selling airline tickets, accommodation, packaged holidays, and other add-on services. These records help you keep track of your company’s performance and are necessary for preparing and filing tax returns as well as maintaining an accurate view of the bottom-line. The most important accounting procedures for the travel industry are the Cash Flow Statement, the General Ledger (GL) and the Profit & Loss (P&L)/Income Statement.
Cash Flow Management: One of the most basic goals of your accounting procedures is to keep track of your cash flow. While running a travel business with multiple daily transactions with travellers and suppliers, it can be easy to lose track of your sales and your incoming payments. Through the right accounting software, you can keep track of your company’s net cash flow from sales and expenses. This keeps track of the cash management of your business and helps identify any financial problems. Make sure that your reservation agents post all business transactions in your accounting records.
General Ledger: Another accounting tool for a travel agent or tour operator is the general ledger. The general ledger gives an overview of your company’s current position. This ledger keeps track of your assets, everything your company owns and what it owes. The accounting impact of all business transactions should be recorded on your general ledger through your accounting software. Most businesses update their ledgers daily or weekly. It is crucial to update your general ledger regularly so you can keep track of your financial status.
Recognising Deferred Income: An important accounting procedure for any business is the process of revenue recognition. This principle establishes when a business has officially earned revenue and can declare the earnings on its accounting statements and for taxes. A travel agency, as a service industry, is not ‘alien’ to deferred income practices. Your agency must recognise revenue as earned as soon as a payment is received. It does not matter when you complete your service to the customer, as soon as you receive payment, you must recognise the payment as revenue.
Income Statement: The last accounting procedure for running a travel agency is the maintenance of an income statement. The income statement records your total income and expenses to calculate your net profit over a period of time. The income statement serves a similar purpose as the cash flow statement. While the cash flow statement only keeps track of cash, the income statement measures the profits of your business. When you start your agency, the cash flow statement is more important as you get the handle of your company’s daily cash flow. In the long-run, your income statement is more important as it gives a better description of your company’s total profitability.
Importance of Record Maintenance: Ledger maintenance and the maintenance of financial records in general are vital across the travel vertical. Owners and managers cannot make well-informed decisions if they don’t know how much money the company currently has at its disposal, how much debt it has and how much revenue it makes. For instance, poor record maintenance might cause a small business owner to think that the company has more cash available than it does, so expenditure may be made on advertising only to realise that funds are actually not available. Industry margins are incredibly tight, especially in airline ticket sales. Hence, good record maintenance is incredibly important and can also help businesses justify tax deductions and file accurate tax returns.
The best accounting software for travel: If you are in the travel business, you should find the best accounting platform to suit your sector needs. You will need a program that provides a full range of features tailored to the needs of the travel industry. There are some general platforms in the market such as QuickBooks Online, Xero, Sage, and various others. However, they are ‘general’ and not tailored to the travel industry in which accounting processes can be very different and complicated at times. It is therefore necessary that when choosing software for your travel business, you need to consider a software which caters for the needs of travel and hospitality businesses. Portway Systems addresses these needs by offering comprehensive Accounting & Finance software to both Retail and Corporate/TMC travel company’s.
About Portway Systems:
Portway Systems is a rapidly expanding travel technology company based in Birmingham, UK. Specializing in Mid & Back-Office, Reservations, ERP, and Business Management solutions for small-to-large travel businesses across the UK & Ireland, USA, EMEA, Portway Systems is committed to delivering cutting-edge solutions to meet the evolving needs of the travel sector.
For more information about Portway Systems and its suite of products, visit www.portwaysystems.com