In most industries, financial analysis is based on data drawn from the General Ledger (GL). For non–travel agency businesses, performance metrics—such as "how did we do last month?" or "was that marketing investment worthwhile?"—are typically answered by running standard GL-based reports like Income Statements or Cash Flow Statements.
Examples:
- How did we do last month? Run an Income Statement.
- Did a marketing campaign work? Compare increased marketing expenses with sales trends in the Income Statement.
- Can we afford to participate in an upcoming promotion? Consult the Cash Flow Statement.
- Was hiring a new employee a good investment? Look at the resulting revenue and expense impacts on the Income Statement.
The Problem with Using the General Ledger for Travel Agencies
For retail travel agencies, the General Ledger often fails to reflect the true financial picture, primarily due to the timing mismatch between when sales are made and when commissions are received.
For example:
- A travel agency may have its best sales month ever in January, with record-breaking bookings and commissions expected. But in the General Ledger, none of this revenue may be recorded, because commissions are only recognized when received—which could be months after booking the trip.
- Conversely, August might have minimal new bookings, but if commissions from travel booked in January are finally paid in August, the GL could misleadingly suggest that August was a highly profitable month.
This mismatch also skews analysis of marketing effectiveness:
- A marketing campaign run in January may indeed generate a spike in bookings that same month (and even into February), but the corresponding revenue won’t show up in the General Ledger until much later.
A Better Way to Analyze Financial Performance in Travel
To get an accurate, real-time view of agency performance, financial analysis should include reports outside the General Ledger, based on reservation activity:
- To assess performance for a specific period: Run reports by reservation confirmation date, which reflects when the actual sales effort occurred.
- To track currently active trips: Run reports by departure date.
- To assess future cash flow and affordability of investments: Run reports by expected commission payment date.
Tres uniquely allows users to input an expected commission date (calculated from departure, return, booking, or payment dates) and run reports projecting commission income. This functionality also applies at the advisor level—advisors can generate reports showing when they expect to receive their commission share.
So What Is the General Ledger Good For?
Despite its limitations in timing, the General Ledger still plays an essential role:
- It drives tax reporting. The Income Statement is what is submitted to the government, and taxes are calculated based on commissions when received, not when booked—often benefiting from delayed recognition.
- It balances out over time. While timing mismatches can distort short-term financial views, over time these variances normalize. Commissions from prior bookings eventually even out when comparing multi-year periods.
- It’s the language of external stakeholders. While internal reports based on reservation data are more accurate for operational decisions, external parties—such as lenders or potential investors—typically expect and understand GL-based reports. Trying to explain commission timing intricacies to a loan officer may not always be productive.