For small businesses in the travel booking and management space, staying on top of cash flow is critical, but nevertheless a major challenge for resource-strapped firms. It’s one of the reasons that software company Checkfront launched a decade ago, with investors earlier this month placing $9.3 million in Series A funding with the company.
“It’s heartbreaking to see our operators having to go through this and weather it out,” Checkfront’s CEO and Co-founder Jason Morehouse told PYMNTS in a recent interview. “In very many cases, they’re on the smaller side, and certainly cash-dependent.”
Checkfront offers software for the operators of travel experiences, like tours and events, to accept and manage bookings, in a market that has taken a significant hit as travel plans are put on hold indefinitely amid the coronavirus pandemic. It’s a particularly intense example of just how exposed these businesses are to global events like geopolitical disruptions and natural disasters, making proper cash flow management vital to the survival of many operators.
Insurance Against Disruption
As Morehouse explained, the current state of global travel exemplifies why it’s so important for small operators to obtain the proper insurance, with Checkfront recently launching a ticket protection tool that ensures operators are guaranteed payment, even when cancellations occur.
“We’re seeing a lot of questions from our operators as to how to mitigate these cancellations,” he said, citing the recent statistics that show just how steep the rise in booking cancellations has become.
It may be too early to know the exact cancellation figures, but in a recent report by the Global Business Travel Association, per a survey conducted between March 4 and March 6, analysts found a 43 percent rise in business trip cancellations alone. Separate research from Skift, whose poll was conducted between March 13 and March 15, found that 46 percent of consumers had canceled their travel plans.
And insurance products aren’t a guarantee for travelers or travel booking providers – particularly at a time when insurance providers expect a sudden influx in reimbursement requests.
Rather, one of the best forms of insurance against disruption is to maintain proper control over and visibility into cash flows, which Morehouse said can be particularly challenging for the travel industry in particular.
Cash Flow Uncertainties
Among the biggest cash flow management challenges for travel operators is an inconsistency in payment timelines. Unlike many other industries, travel operators must offer flexibility in how they accept payments, with some travelers looking to pay at the time of booking, others wanting to pay upon completion of their trip and still others interested in providing a down payment and paying the rest of their balance at a later date.
Cash up-front is always the best option, said Morehouse, but it’s also imperative that these travel operators are able to accept their customers’ preferred form of payment. That not only involves timing, but also allowing for a range of payment methods on both online and mobile portals.
“It’s up to the way they run their business, or the way their customers are comfortable with, but predictions of cash flow are going to change based on that configuration,” he said. “Cash flow is pretty complicated to predict.”
Making matters even more complex is the challenge many businesses face in their reporting processes, and how this variety in payment collection impacts revenue recognition and accounting.
Data to the Rescue
Digitizing and automating back-office processes, from booking to payment acceptance to reporting, will help businesses obtain deeper visibility into cash flows and financial positions, with platforms like Checkfront able to make use of that electronic data for analytics purposes.
Morehouse noted that working with technology providers that can alleviate the burden of manual data entry and analysis is crucial for businesses of all sizes in the travel industry. But particularly in times of such uncertainty, data analytics can be the difference between weathering the storm or shutting the doors for good.
Similar disruption and cancellation spikes were seen during the Australian wildfires earlier this year, he said. The unfortunate truth is that there is no guarantee that all industry players will be able to survive the current volatility. But analysts are confident that the online travel industry will remain resilient. For those operators that endure, there will be future disruptions ahead, so having technology and analytics capabilities in place will continue to be of paramount importance for this market.
“It’s always super important to have data, and the technology to collect those insights,” said Morehouse. “If you’re working through spreadsheets, it really doesn’t provide insight into your business to make important decisions around growth and defensibility. The most important thing is to get in front of the issue to make core decisions about your business.”