Question

Name and discuss at least 3 cash flows that you would likely see in the Investing and/or Financing activities sections of your Cash Flow Statement. DO NOT use only Investing or only financing cash flows—at least one should be present in each area of cash flows for a Travel Agency

Answer 1

Major cash flow activities in a Travel Agency will include:

• Operating Expenses- daily and periodic, out cash flow such as accounting expenses, license fees, maintenance and repairs of the office premises (housekeeping, janitorial service, pest control, air conditioning office expenses, supplies, legal fees, utilities etc.) can be extremely costly if not monitored properly by the administration team. These are daily and frequent Variable costs, which can decrease the overall profit of an organization (large or small does not matter), in the long run
• Pending Credit Payments from customers may be government or private, when pile up can be huge obstacle to an organization’s growth strategy. This is the most common cash flow trouble observed in mid size travel agencies, who don’t tack upfront payments from corporate or individual customers or either they lose money to their own channel partners or vendors during arranging stay/ meal/ travel bookings. When profit and loss statement is compiled via ledgers, then most of such issues come across in the management’s eyes. Many such debt’s had to be written off, such as after not receiving payments from 1-3 years. Hence, revenue generation suffers
• A sufficient day to day or yearly Working Capital is the most critical component in cash flow and requirement of a travel agency. For example- while booking any stays and travel facilities through vendors located in a geography, Travel companies not only require to maintain good relationship with words but also transactional relationships need to be maintained, which requires upfront cash to be paid or right communication tools and technologies, spending to face to face meetings with both customers and vendors etc. With lack of correct manpower/ marketing / advertising companies, or rather say appropriate right quality resources, no travel company will succeed on customer/ vendor side. Hence, working capital investment is the first and most critical step for a long play