Many travel agencies look healthy on paper. Sales are growing, margins are positive and the monthly report shows a profit. Yet the bank balance tells a different story.

Supplier payments fall due. BSP remittance dates arrive. Salaries and rent must be paid. And the cash is not there, because it is sitting in customer outstanding.

The problem is rarely sales or pricing. It is collection. Profit that has not been collected is not cash, and a travel agency runs on cash.

Why a profitable travel agency can still run out of cash

A travel agency sits between two very different payment timelines. On one side, airlines, consolidators, hotels and DMCs expect payment on their terms. Airline sales settled through BSP are remitted on fixed dates, whether or not your customer has paid you.

On the other side, corporate clients, sub-agents and repeat customers often book on credit. Every day they delay, your agency is funding their travel with its own money.

This is how collapse usually happens: gradually. Overdue balances grow, the agency delays its own suppliers, stretches bank facilities and comes under pressure on its settlement obligations. By the time the owner notices, the business is profitable on the P&L and failing in the bank.

The real gap: no credit management policy

In most agencies that face this problem, credit is decided by relationships, not rules. A sales executive extends credit to keep a good customer. A manager approves another booking because the client "always pays eventually". Nobody owns the total exposure.

A credit management policy replaces these individual judgement calls with clear, agreed rules. Here are the policies we recommend travel agency owners adopt.

1Give credit only as much as you can afford

Credit is not a sales tool you can hand out freely. It is your working capital, lent to your customer.

• Set a total credit ceiling for the agency, based on the cash you can tie up without missing supplier or BSP payments.
• Set a limit for each customer, based on payment history, booking volume and how long you have worked together.
• Start new accounts on low limits and increase them only after a record of on-time payment.

If the total of all customer limits is more than your agency can carry, you do not have a credit policy. You have a risk you have not measured.

2Never give more credit out of fear of losing what is already pending

This is the most common trap. A customer owes a large amount. You worry that refusing new bookings will upset them and you will never recover the old balance. So you keep issuing on credit.

Each new booking does not protect the old debt. It adds to it. If the customer cannot pay what they already owe, more credit only increases what you can lose.

A better approach:

• Agree a written repayment plan for the existing balance.
• Move new bookings to advance payment or cash-on-issue until the account is back within terms.
• Escalate early to the owner or finance head, rather than letting the sales team carry the decision alone.

3Apply the stop-loss principle

Traders use a stop-loss to decide, in advance, the maximum loss they will accept before they exit a position. The same discipline works for customer credit. Define two triggers for every credit account:

When either trigger is hit, new credit bookings stop until the account is regularised. No exceptions without documented management approval.

The value of a stop-loss is that the decision is made before emotions and relationships get involved. Where your accounting or booking system allows it, set these limits as system controls rather than relying on memory.

4Send statements on time, every time

Customers delay payment when they are unsure what they owe. Late, incomplete or inaccurate statements give them a reason to wait.

• Send statements of account on a fixed schedule, at least monthly, and more often for high-volume accounts.
• Show each invoice, payment, credit note and refund clearly, so the customer can reconcile quickly.
• Reconcile your own records before you chase. A collection call about an invoice that was already paid, or a refund not yet credited, damages trust and delays everything else.
• Resolve disputed items quickly, and collect the undisputed balance in the meantime.

5Put credit terms in writing

Every credit customer should sign agreed terms before the first credit booking: the credit limit, the credit period, accepted payment methods, what happens when payments are late, and any security your market practice allows. Written terms turn an awkward conversation into a reference to an agreement.

6Review ageing every week and make collection someone's job

A receivables ageing report shows how long each balance has been outstanding, typically in 0–30, 31–60, 61–90 and 90+ day bands.

• Review it weekly, not just at month-end.
• Assign a named owner for each overdue account, with a clear escalation path: reminder, call, management contact, credit stop.
• Consider linking sales incentives to collected revenue, not just booked revenue. What gets rewarded gets done.

A quick self-check for agency owners

How SkyBook Global supports travel agency finance teams

SkyBook Global provides travel agency accounting services built around the way travel businesses actually work. Our scope includes reconciliation of accounts receivable and payable, settlement of invoices against receipts and payments, processing of credit notes and refunds, and notification and follow-up of unbilled services.

Clean, reconciled receivables are the foundation of every collection conversation. When your books are current, your statements are accurate, your ageing is reliable and your team can chase with confidence.