Which Accounting procedures are required for Travel Agencies?
Travel agencies are usually difficult businesses with variety of product margins and pricing variables. The disciplinary management of cash flow for ensuring appropriate sales and determine potential issues, your balance sheet to understand your assets and liabilities and your income statement to place an eye on profit margins are all crucial for managing a successful travel business.
However, starting a travel agency doesn’t come handy, it requires for you to keep right accounting records for your business. These records help you out in keeping track of the performance of your agency and are essential for preparing your tax return.
The major accounting procedures for a travel agency entails the cash flow management, ledge, revenue statement and income statement.
Cash Flow Management
Keeping track of the cash flow of your agency is one of the most important objective of your accounting procedures. When operating a travel agency with multiplicity of daily transaction, it becomes simpler to lose your sales track and your incoming payments.
By using accounting software, one can manage track of their company’s net cash flow from expenses and sales.
This keeps hold of the cash management of your business and assists in recognizing any financial problems. Ensure that your agents post all transactions of your business in your accounting records.
General ledger is another accounting tool for a travel agency. The general ledger highlights the summary of your company’s current position.
This ledger keeps track of the assets of your agency, everything your company owns and owes. The general ledger records all the accounting effect of all business transactions through your accounting software.
The ledgers get updated daily or weekly by most of the businesses. It is essential to update your general ledger frequently so you can focus on your agency’s financial status.
Identifying revenue is another accounting procedure for any business. This principle sets up when a business has earned revenue officially and can announce the earnings on its accounting statements and for taxes.
As a service sector, a travel agency must employ the cash method for identifying revenue. Your agency must identify revenue as soon as a payment is obtained.
Whenever you complete your services to your customer, hardly matters but what matters is as soon as you obtain payment, you must identify the payment as revenue.
Maintaining an income statement is the last accounting method for running a travel agency. Your total income and expenses get recorded in the income statement in order to calculate your net profit over a time period.
Your income statement fulfills an identical purpose as the cash flow statement. While the cash is being tracked by your cash flow statement, on the other hand, your business profits get measured by your income statement.
When you start your agency, the cash flow statement is more significant as it offers you an effective description of your company’s total profitability.
The above variables help you to conduct your new travel business to run smoothly and efficiently. Any mismatch entries or losing out any important entry would become critical for further course of transactions to manage effectively.