Are you struggling to keep up with your travel agency bookkeeping? If so, you aren’t alone. Countless business owners find it difficult to stay on top of monthly procedures while still handling other critical areas of their business, like customer service and lead generation.
However, prioritizing the bookkeeping of your travel agency can lead to some startling benefits, from improved cash flow management to increased profitability. Let’s go over the importance of bookkeeping for your travel business and ways to get your accounting system back in check.
Clarity In Your Travel Agency Cash Flow
The cash flow statement is one of the most beneficial financial statements for travel agents and agencies. However, it can be difficult to compute without updated bookkeeping. The cash flow statement tracks the cash inflows and cash outflows of your travel agency to determine your overall financial position.
Your inflows are the money you receive from customer trips like commissions and fees, while your outflows are expenses, such as bank charges, legal expenses, and technology expenses. Generating a positive net cash flow means your travel agency is making money.
Travel agency bookkeeping ensures all transactions are recorded, so you can generate an accurate cash flow statement. Maybe you find that your revenue is expected to decline next month, so you push off new office equipment or draw on a line of credit.
Knowing this information before your cash runs out is essential to properly plan and avoid over-drafting your bank account.
Improved Financial Performance
The goal of most travel agents and agencies is to generate a profit. Regular bookkeeping can help you improve the results on your income statement, creating more take-home profit.
There are three main financial statements that travel agencies should track: the balance sheet, the income statement, and the statement of cash flows. A travel business that tracks these three financial statements is able to develop insights about profitability, liquidity, and overall financial health.
Regular bookkeeping ensures you have access to the most recent data. In fact, most travel agency online accounting software programs connect with your business bank accounts, allowing transactions to flow in as they occur.
Whether you do it yourself or use one of the professional travel agency bookkeeping services, it’s important to choose robust accounting software that can track how much cash your travel agency business has on hand at any given moment. This gives you more information to base your business decisions on, ultimately impacting your bottom line.
Greater Scalability Options
A travel agency business that prioritizes bookkeeping can have an easier time scaling. For example, the travel and tourism industry can be volatile, with receivables being delayed months until your clients actually take the trip. This can make it difficult to create a budget and maintain a good cash balance in your bank accounts.
Regular bookkeeping ensures that you have transparency in every detail of your travel agency accounting system. This gives you a solid foundation for making decisions surrounding the growth of your business.
It’s easier to grow when you know what you can spend on advertising to a new target market, or how much revenue a certain segment of your travel agency is generating. The more insights you can develop from your accounting data, the less risk you have during expansionary periods.
Not to mention that scaling into new areas might involve marketing and staffing expenses that you need to plan for.
Expanded Tax and Financial Planning for Travel Agents
Travel agency accounting also involves financial and tax planning. One of the major expenses of your travel agency might be your tax liability. Up-to-date bookkeeping can give you and your tax professional valuable insights into your financial position, allowing you to effectively plan for tax time.
Maybe you notice that you have excess income, so you purchase that new piece of equipment you’ve been needing—or that you are projecting a loss, so no estimated tax payments are due. Deriving this information relies on having the right bookkeeping controls in place.
Improved Accuracy and Reduced Potential for Errors
Using the right bookkeeping software and procedures in your travel business can reduce the risk of mistakes. Let’s say that you neglect to complete monthly reconciliations of your bank accounts in your bookkeeping software. Are you more likely to detect a mistake from last month or from six months ago?
Especially if you are an independently credentialed agency, it can be difficult to remember what down payment you received from customers or the portion of credit sales that should be deferred. Regular bookkeeping serves as a continuous and consistent check that your accounting statements are accurate.
This makes tax time a breeze when you can pull accounting information in a matter of minutes instead of spending days trying to reconcile your bank statements from months ago.
Separation Between Business and Personal Bank Accounts
Your personal bank account should be separated from your travel agency bank accounts. If you were to get sued, the courts could come after your personal assets to satisfy a judgment when they see the comingling of business and personal expenses.
Travel agencies who engage in regular bookkeeping are able to detect personal expenses and properly segregate them from items on the financial statements. This ensures that there is proper liability separation and subsequently, legal protection of your assets.
Compliance With Travel Industry Regulatory Agencies
Travel agencies are often subject to greater reporting standards of regulatory agencies because of the complexities with their revenue. For example, revenue can only be recognized once performance obligations are satisfied, which is generally when your clients take their trips.
Failure to follow the standards set by regulatory agencies in the travel and tourism industry may subject your agency to stiff fines and penalties, making it more difficult to grow. Regular bookkeeping not only ensures all transactions are recorded with the proper cut-off, but can also guarantee that you are following necessary laws and regulations.
As a busy travel agency owner, it can be hard to keep up with bookkeeping. This is why many business owners invest in professional travel agency bookkeeping services, designed to keep their information up-t0-date and accurate, without taking up time that could be better spent on other critical business activities that generate revenue, such as sales and marketing.