What is Driving the Demand for an Integrated Back-Office ERP?
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Corporate travel agencies are faced with a complex set of risks, an ever changing environment and a set of requirements unique to the travel industry. This paper examines how enterprise-level tools can mitigate these risks, empower TMCs to manage change and satisfy their travel-specific requirements.
The Need to Manage Risk in a Competitive, Global Environment
Inefficiency and Inadequate Visibility Associated with Disparate Back-Office Systems
Lack of integration adds layers of inefficiency and masks true operating costs. For example, understanding the cost of sales is directly related to the manpower requirements of a given corporate account. Does the account require more senior agents? What is the profile of the client with respect to corporate booking tool adoption and touchless ticketing? How many changes are made before and after ticketing? What does the corporate account require from the client services organization and what is the cost of this support? Evaluating the true cost of sales, can be a challenging calculation if human resources, payroll and the company financials exist in disconnected, standalone applications.
Inability to Make the Jump from Reporting to Business Intelligence
When airline commissions were eliminated and TMCs started charging transaction fees, successful TMCs began offering consulting services to pinpoint areas of additional savings opportunities for their corporate clients. Some mega-TMCs have created standalone consulting divisions offering proactive advice and analysis. To provide these services, TMCs require more than basic reporting tools; they need sophisticated management reporting and Business Intelligence (BI) systems that can extract meaning from multiple sources of data that might not be explicitly apparent from simply generating reports. With BI, TMCs can identify travel patterns, measure compliance to corporate travel policy and offer more competitive services to their clients. TMCs using dated, disparate systems are unable to match these offerings. Michael Peranio, CFO of Omega World Travel, commented on how Agresso has improved his company’s reporting, allowing Omega “to interact with the client in real-time – quite an advantage over the days when reports had to be generated and mailed to each corporate account.”
The Demands of Global Commerce
Global commerce is a fact of life, and even large regional TMCs must accommodate the global needs of their clients. Agency accounting systems must be able to manage multiple currencies and provide summary information in a common currency. This is needed both to track their own performance and to provide management reporting to multi-national clients. Additionally, large travel agencies are often members of a consortium or partnership that require seamless integration of data between independent companies.
The Inability to Manage Change
Turbulent business environments seem to be the norm these days and TMCs can face many kinds of change. TMCs still using disparate, independent systems and manual intervention are hard pressed to respond to new situations or requirements.
Reorganizations
Reorganizations can be highly disruptive to a company, and their impact on the internal system can be especially stressful for the IT and accounting departments. Enterprise-level ERP systems in the travel industry that encompass multiple modules can react to reorganization more quickly and, once the change is implemented in the main system, the new organization is reflected in all modules. This process is vastly different in an environment where individual software solutions are deployed for travel accounting, human resources and core financials. Michel Botbol, COO at Ultramar Travel, realized the value of the company’s investment in an integrated ERP solution from Agresso, which “allowed seamless growth (without adding personnel) and the ability to provide superior data to our customers…during a period that saw Ultramar grew three times its original size.”
Mergers and Acquisitions
Mid-sized TMCs often have to explore mergers with their competitors or acquire online businesses to augment their services. When merging with another company, the internal enterprise-level systems will need to import information from disparate systems and provide senior management a detailed review of financials and resources for the combined new entity. These tasks are easier when the two entities are on a common enterprise-level solution.
Regulatory Reporting Requirements
Government regulations that impact a TMC’s business are increasingly implemented around the globe. In the U.S., the Sarbanes-Oxley Act (SOX) was enacted in 2002 in response to a number of high-profile business failures. SOX created new regulations that force companies to use specific accounting processes. Today’s ERP systems satisfy these reporting requirements, thus an integrated ERP and travel accounting solution with a single version of customer information, receivables, payables and GL entries is the best and fastest route to regulatory compliance. Other countries may have different laws that govern travel entities and internal systems need to be accessible to meet those countryspecific needs.
The Specialized Requirements of Travel Accounting
As stated earlier, travel accounting has its own unique requirements beyond the scope of general ERP systems. Thus a travel accounting module should be integrated within a broader ERP solution, automating and linking the following activities with the rest of the enterprise:
Airlines Reporting Corporation (ARC)/ Billing Settlement Reporting (BSP)
Reporting air ticket sales to ARC (U.S. only) or BSP (all other locations) must encompass the entire life cycle of the ticket. It is common in business travel to change plans frequently, meaning tickets often need to be re-issued or refunded. The residual value of a ticket should be stored and accessed for future travel. The reconciliation of the BSP report must be done automatically so the settlement can
be completed and manual intervention should be minimized as it is directly tied to the value of the travel accounting module. An integrated travel accounting module will automatically feed the information into the general ledger, accounts receivable and accounts payable systems.
Debit Memos
When errors do occur, airlines are quick to issue debit memos. An integrated travel accounting module should provide quick access to the record in question and once paid, flow the expense back into the general accounting system. If the source of the debit memo is the traveler – for example, he accepts a ticket that requires a Saturday night stay and then changes his plans to return on Friday – tracking this memo back to his action can result in the corporate client being billed for this amount. An integrated system can include the cost of debit memos into the value of corporate clients and identify clients that may represent a liability to the TMC.
Commission Tracking, Collection and Reconciliation
Tracking, collecting and reconciling commissions from hotels and other travel suppliers can be a daunting task for most agencies. In cases where TMCs use their own personnel to track unpaid commissions, managing the process must be a standard function within the travel accounting module, including the automation of dunning notices to the offending supplier. When TMCs hire third-party companies to collect missed commissions, travel accounting module must be able to evaluate the performance of these third-party services.
Account Services and Reporting
Account representatives are generally tasked with providing corporate clients with services ranging from problem resolution to advice on areas of additional savings. The system used by account management must reflect the detail captured from the travel accounting module of the enterprise system. This system provides more than just the simple reservation data, allowing the slicing and dicing of information by origin and destination, suppliers, branches and travel patterns. Accounts services staff need easy access to this kind of detail and the system should allow as much self-service activity as possible.
Data Validation and Clean-Up
Raw information from the GDS must be analyzed and categorized but it often has missing fields due to agent POS input errors. These omissions or errors must be tagged and corrected prior to their inclusion in reporting and BI systems. An inefficient travel accounting solution greatly increases the amount of effort required to correct these mistakes. The GDSs remain the underlying engine for travel commerce and so travel-specific accounting applications are still necessary. But a vast number of TMCs still rely on traditional accounting platforms for their back-office technology and though the need for travel-specific accounting applications has not diminished, agencies that rely on these systems alone as the cornerstone of their back-office strategy miss the fact that more integrated comprehensive solutions are available.