Nick Williams examines how travel companies can ensure they’re ready for 2018’s new revenue recognition standards.
The most forward-thinking of travel operators have already realised that investing in technology is vital if they are to stand out in a very crowded marketplace. However, having invested heavily in travel management and booking applications, the expected benefits don’t always fully materialise for some travel businesses. In the main, this is because these cutting-edge solutions are often bolted-on to low-end, bespoke or Excel-based back office systems, with much weaker capabilities across other vital business processes, such as financial management.
While this bolting together of disparate systems and the creation of necessary workarounds can be a relatively effective approach in the short term, the new revenue recognition standards, which come into effect in January 2018, mean these methods will no longer be good enough. The additional pressures created by the new standards are causing the most savvy travel operators to review their processes and procedures, giving themselves adequate time to make the necessary changes.
The main thrust of the new standards is to provide a single, more systematic approach to financial statement presentation, enabling any users of financial statements to better understand a business’s revenue and cash flow, particularly when it concerns customer contracts. While it may seem a daunting change for many travel businesses, with a five-step methodology required alongside quantitative and qualitative disclosure requirements, the right technology can make all the difference. Customer loyalty programmes, identifying capitalised costs, and the need for more thorough financial reporting can all be streamlined with the right software.
There are integrated solutions on the market designed to meet the specific business needs of the travel sector, and they not only provide a seamless link between front and back office processes, but can also fully manage revenue recognition. These systems fulfil the reporting requirements of the new standards, as well as effectively preparing management accounts to ensure full compliance. By automating some key manual processes, eliminating the need to import data from one system to another, and mitigating against the inevitable errors that occur when dealing with disparate systems, the best solutions on the market actually reduce the workload of the finance team. At the same time, the in-depth financial management information that results from joining up these processes, can be put to good use by the business, underpinning robust planning, budgeting and forecasting with timely, accurate business information.
While advances in Global Distribution Systems (GDS) may give all travel operators access to the same market information at the same time, it’s those businesses who have time to focus on how best to use this information that will come out on top. For those travel operators who are unprepared for 2018’s revenue recognition changes, compliance with the new standards will undoubtedly take up a lot of valuable time, which could be spent on more value-add areas of the business. For those who have established a clear understanding of what’s required, compliance need not be a major hurdle.
One of our team will be in touch shortly.