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The Business Of The Travel Business

Corporate travel credit card benefits - let me count the ways

Tharwat Abouraya, CTIE President  Jul 29, 2011

Most every agency engages in the practice of allowing more than an average of 13.5 days for a corporate travel customer to pay for tickets issued. If the tickets are issued on a credit card, however, ARC (Airlines Reporting Corporation) does not draft your agency bank account; instead, the airline collects directly from the credit card company. This cash flow benefit is significant in an industry which operates on such a slim profit margin. And there is even more good news! Travel agents can deduct the commission derived from transactions directly from the authorized ARC draft amount. In fact, some agencies whose accounts are nearly 100% credit card do not have their accounts drafted at all; they receive a check every week for the airline commissions earned.

During the hours previously spent worrying about the Tuesday night bank balance, you can now look at the way in which the cc can help you better manage your business. If a significant proportion of your accounts were switched to ccs, could your employees spend their time more productively? After all, the need to process all those statements, or to have an employee research so many unidentified payments, or to post off the accounts receivable would be negligible. Furthermore, the complications of stringent internal cash controls are lessened.

The elimination of the statement-handling responsibilities yields even more profit to your agency. How many of your accounts still demand that an extra copy of the invoice be attached to the statement? How many hours per week are lost to this task? How many payments are delayed because an invoice copy is missing when the statement arrives at the customer's accounting department (incidentally, this a classic manner in which corporations delay payments and, thus improve their cash float)? How much does it cost for you to print all those extra invoice copies and statements? Paper alone may comprise as much as one percent of your commission revenue.

By encouraging your clients to use credit cards you can:

1.Earn your own interest income on funds previously "invested" with the ARC on behalf of your clients;

2.Significantly improve your cash position;

3.Save dollars previously spent on forms and payroll;

4.Benefit from fewer complications and increased productivity/profitability.

The credit card benefits both the buyer and the seller.

All of the internal control benefits which accrue to the corporation that uses some form of credit card system lead to other ancillary benefits:

1.The corporation benefits from a significant cash float-the travel is paid for when the credit card bill becomes due.

2. A company which accurately reflects its financial position by accruing its travel expenses in the month in which they are incurred can demonstrate its aggressiveness in controlling the balance sheet (i.e., recognizing the expense, but not paying for it until a later date).

3.The client needs to issue only one, or at most two, checks per month for the bulk of travel related expenditures.

4.Use of a credit card reduces significantly the amount of cash a corporation has tied up in travel advances.

5.Most of the major credit card companies offer free life insurance for passage booked on the credit card. This not only adds peace of mind to the traveler, it can also translate to a significant savings to the company in its life insurance benefits exposure.

Would you believe that you might reap bountiful benefits without doing any more than providing the service of making corporations aware of the value of using a corporate credit card? The various companies offering credit cards will fully explain the services offered, and if your targeted account is large enough, will probably even follow-up on your introduction and sell their product directly on behalf of your agency!

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Corporate travel credit card benefits - let me count the ways
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