news comment
ttglive.com
“Companies fail because they cannot pay their debts, not necessarily because their margins are too small”
T
Chris Lee Barclays Commercial
here has been a great deal of talk recently about the challenges facing travel businesses and what strategies for growth and development they
should employ during the economic slow down. There are plenty of predictions forecasting
more failures to come, but there are practical steps businesses can take and, in my view, these are the issues that should receive attention.
Foreign currency Mitigating risks from factors outside the company has become more crucial than ever. As recently as a couple of years ago, foreign exchange hedging and derivatives were often the preserve of larger travel companies. There has been a sizeable extension of this within Barclays Corporate’s customer base to smaller companies which can now concentrate on core trading having protected their budget rates. They no longer have to worry about all of their hard-earned profits disappearing if the dollar or the euro moves against them.
Cash flow Companies fail because they cannot pay their debts, not necessarily because their margins are too small. There are many things that companies can do to keep the cash rolling in. Tight debtor and creditor control is essential and a strong emphasis on costs is paramount. Examine every outgoing, from staff expenses, company travel and headcount to cutting out unprofitable trading.
Access to finances Contrary to popular belief, banks and other finance providers are working very hard to make sure there is sufficient funding in the market for those companies which present a viable business proposition. Given the recent
16 29.10.2010
mixed trading environment, as well as financial stresses, it is now more vital than ever for companies to provide good quality information to enable lenders to assess funding requests. There are three clear steps that travel com- panies can take to maximise their chances of securing the bank funding they need:
1
engage with lenders early and openly. Whether the business needs funds to
address financial problems or to exploit invest- ment opportunities, it is vital to give lenders time to make an informed decision in a transparent, open dialogue.
2
provide the bank with high-quality management information, demonstrating management’s firm grip on the business. This information should include not just financial metrics but also operational measures used for day-to-day decision-making. These three steps will not only improve a
3
travel company’s chances of raising finance, they will also enable the bank to tailor a funding package with the right product, funding structure and price.
Staff training Properly planned staff training can play a major role in addressing the challenges created by a slowdown. Cutting training budgets at this time can cause more problems than it solves.
Chris Lee is head of travel at Barclays Commercial
travel companies need to provide good quality, detailed information to enable
lenders to assess funding requests. This ought to include an understanding of historic, current and forecast trading performance. While profit and loss and balance sheets are important, banks are most interested in a travel company’s cashflow. Demonstrating careful cashflow management is vital.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68