When I started Reynolds Travel over 30 years ago, I depended a lot on leisure. With the Chernobyl nuclear catastrophe in 1986, no one wanted to travel and, at that time, most of my leisure travellers were on 30-day accounts.
I quickly realised that this was not the way to run a business. Those businesses that were running on credit card payments, however small they were, had a good cash-flow and therefore, were more able to survive. And although people had stopped travelling, they still owed money.
This was a wake-up call for me and I focused on collecting the money that was owed to me and took the time to recover what was left of my business. It was quite horrendous.
I took the decision that, from then on, I would run the business on different principles. I was going to turn my business around and stop offering 30-day credit. Until then I had even been offering credit on foreign exchange. I also decided to change my focus to corporate travel.
I have been doing this since 1986 and these days I tell clients that, unfortunately, I no longer operate on 30-day accounts.
As a travel agent or TMC, you need to consider this, because it may be the only way for you to survive. I know agents are grappling with keeping their Iata licences because they are facing the same problems that I did in 1986. I have decided to keep my Iata licence but this should not be as traumatic for me as it would be for someone carrying a book of a million.
Working on 30-day accounts could cost you millions. This could represent about 80% of your cashflow and threaten your survival, because, remember, we’re currently in difficult times where clients are battling to meet their commitments. Everyone is suffering financially because of COVID-19, and travel agents are the last people who will be paid.
Events like COVID-19 happen. Travel agencies have small margins that are quickly eaten up by offering credit facilities. I worked hard to show clients that there were many benefits for both the TMC and the client when we changed to credit card payments. With a credit card, clients have 55 days to pay but on an account with an agent it’s 30 days. Big accounts should have credit cards.
I have realised that switching to strictly credit card payments does not put clients off. They will understand and many respond positively. Running your business this way gives the impression that you have sustainable business principles and gives the client confidence to do business with a TMC that is vetted by a credit card company.