As demand for tourism continues to drop due to COVID-19, it’s important for travel companies to re-evaluate their cash flow plan. Operations have changed drastically over a short period of time, enforcing the need for a financial assessment and new action plan.
How To Manage Cash Flow For Your Travel Business
As you work through this process to better manage cash flow, get your team involved as well. They may have valuable suggestions or input that you hadn’t considered.
1. Begin With An Extensive Cash Flow Audit
When did you last update your cash flow plan? If it was recently, then it probably includes all your regular projected expenses and income.
However, if it’s been a while since you reviewed this document, spend some time checking it to see that you have included all your most recent expenses. You may have brought on new team members or signed a new office lease since the last update, so it’s worthwhile ensuring that it’s an accurate reflection of your projected monthly spend.
As your office dynamic shifts and the team starts to work remotely in response to coronavirus, you might also see significant changes to work-related expenses. Keep a tab on these, as these could change weekly or even daily, affecting your bottom line.
2. Take A Hard Look At Expenses
Now that you have an up to date list of expenses look through it to see how you can lean down during down this time.
Start with the fixed monthly costs. Currently, banks in the US are offering various reprieves to their customers. You may be able to temporarily defer loan repayments, get a waiver on various fees, make interest-only payments – check in with your bank to see what they are doing to assist during this time.
Then there may be other variable costs that you can remove from your cash flow plan too. For example, you could get your employees onboard with putting a temporary hold on any scheduled team building events, and postponing dividend and bonus payouts until the situation has stabilized.
It might make sense to suspend paid advertising campaigns as well for the time being. With demand low, your outreach efforts will be valuable when offered as client support at the moment.
3. Keep Conversations Going With Clients
In these times, it’s important to manage disputes and prevent chargebacks from clients. If you’re not communicating effectively, those who have paid money to your business for upcoming trips may contact the bank to issue a chargeback. Not only can this disrupt your cash flow, but it can also have damaging effects on the relationships you have with them.
So, to stay on top of the situation, be proactive in supporting clients throughout the crisis. Travelers with immediate or upcoming trips scheduled for the near future have no choice but to cancel plans. However, they might not know that there are other choices given the situation. As you assist them with their trip cancellation, layout the options at the same time.
While it’s important to respect their wishes for a refund if they ask for one, be sure to let your clients know that they can carry forward their deposits or payments to book once it is safe to travel again. They may be open to tentatively booking a spot on a future trip that’s lined up, or receiving travel credit to use at a later date.
Not everyone will want to do this, but some might, and this can help your immediate cash flow.
4. Negotiate With Your Suppliers, Vendors, Partners
And we say this within reason, of course, as everyone is in the same boat at the moment with COVID-19 wreaking havoc on livelihoods. The times call for us to pull together though, and you may find some reprieve for your business after having an honest conversation with your suppliers, vendors, or partners.
Lead by being transparent about your situation, and you may discover that some are able to help you, whether it’s to negotiate payments or waive certain fees. Whatever the case may be, collectively devising a cash flow plan to benefit you both will strengthen your relationship.
5. Understand Your Business Interruption Insurance
If you have a business interruption insurance policy, it’s worth investigating to see whether it covers you during coronavirus.
After the SARS epidemic, some insurers wrote in specific exclusions relating to epidemics and pandemics, meaning there is no guarantee you will be covered. However, policies differ according to wording used, sector you operate under, and type of damages covered, so you’ll need to look into your own to see what it allows.
6. Consider Other Income Streams
While sales drop for your usual travel products, you could give thought to adjusting your offering to suit the adapted market. Even though this may not be an immediate money generator, consider what will pick you up sooner to provide financial relief once travel restrictions lift in the future.
For example, it may take longer for international travel to pick up after coronavirus. That said, local travel is likely to pick up during that time, and you will do well to serve this market. As you head into quieter times in business, connect with local partners and devise a new offering to release when the time is right.
7. Seek Government Assistance
Worldwide, governments are announcing stimulus and support measures for businesses during the COVID-19 crisis. These include subsidies, paycheck protection, disaster assistance, and tax breaks, among others.
We’ll shortly be putting up another post relating to this, so check back in for more information. In the meantime, there are some helpful links in our resources list as well.
Devising a new cash flow plan needs to be an integral part of your overall business response to the coronavirus and planning in the near term. It’s also a time to look into contingency measures and discover new opportunities. Travel businesses that adapt their processes and systems now will emerge from this pandemic stronger.