Can TMC's take control of their cash flow by working together on tougher credit policies? Can TMC's take control of their cash flow by working together on tougher credit policies?

Why should travel companies be funding their clients’ travel?

In this month’s roundtable debate I was amazed to learn from travel company heads that it’s become standard industry practice for Travel Management Companies to offer their clients months of free credit.

TMCs will often wait up to five months before receiving payment for their services (that is if corporates ever get round to paying them at all, which in today’s post-recession environment is apparently an all too familiar situation).

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Given that travel agents are not qualified bankers, why on earth have they suddenly moved into the money lending business?

This is obviously a great situation for clients to be in, but by extending months of free credit TMCs are just becoming a free source of money at their own expense. No doubt corporates know this and happily factor it in to their own cash management plans.

But don’t forget these are businesses far bigger than those of the travel companies they are taking advantage of.

And what if the client can’t or won’t pay for the travel in the end?
It’s time to clamp down on this behaviour. Travel bosses at the roundtable all agreed that the problem stemmed from a lack of understanding on the customers’ side about changes in the industry since zero commission.

Clients need to be properly educated about the fact that travel agents don’t get paid by the airlines anymore, and that just like any other service industry, payment is due promptly upon completion of that service.

But it also comes down to professionalism in the industry. If all TMCs got together to work out standarised travel industry credit terms that were implemented across the board, this would mean better incomes for everybody and a chance for the industry to move forward.

But this would only work if everyone agreed, and acted as a professional body. Not if one agent saw it as a chance to grab accounts by undercutting everyone else. Cash flow is central to everyone’s survival. It’s time to take control of it.