Travel companies face continual pressure to maintain positive cash flow, which is necessary to be successful and continue to invest in the business. Seasonal imbalances, late customer payments, and lack of incoming revenue are all common challenges that businesses face that can impact cash flow. A recent report by Xero showed that only 52.1% of UK businesses were operating in positive cash flow this March. Another study by U.S. Bank showed that 82% of businesses fail due to cash flow problems!
3 Ways Virtual Card Numbers (VCNs) From WEX Can Help You Manage Cash Flow
While a number of factors should be considered within the business model to manage cash flow, there are some simple ways to address these three common problems. In fact, just the way you pay suppliers can have a big impact. Here’s how using VCNs can make a difference in these major cash flow areas.
Seasonal imbalances and late payments. Many travel companies have peak seasons where their revenue spikes and seasons where business dips. Travel companies can also face unexpected slow times caused by weather patterns, such as hurricanes, or political situations and terrorism. Having a clear understanding of what to expect at different times of the year can help a business plan for seasonal imbalances.
One simple way to cover costs during expected or unexpected downturns is to access a credit line. And when you use VCNs, you can do this at no cost to your business. You can pay your suppliers immediately, without needing to wait for customer payments to come through, and you can settle your VCN account at a later date. You can also invest cash freed up by having access to a credit line into your business during slow periods, so you’ll be ready to serve your customers during peak seasons.
Incoming revenue. During slow periods, you may be thinking of alternative ways to grow your revenue stream. When you use VCNs, you generate a revenue stream just by using them. Rebates offered allow you to earn money on payments made with VCNs, creating a new revenue stream for your business. Traditional payment methods, such as bank transfers or checks, rarely offer this benefit.
Unnecessary fees that deplete your capacity to generate revenue. Every business needs to ensure that they’re maximizing value and minimizing costs wherever possible. Many companies pay excessive fees on international payments due to the method of payment. When you make international payments by VCN, you can save on each transaction by reducing FX rate markups and cross-currency fees, which typically add up to 3% per transaction.
Learn more about How FX Rates Impact Your Travel Business and how to Build A Strategy For Foreign Currency Transactions.
Cash flow is an issue that needs to be addressed from different angles. If you can extend your credit, increase your revenue and decrease your expenses, you’re well on your way to managing cash flow and ensuring you’ll have the resources on hand to handle any situation.