No one is likely to deny that traveling is rather popular nowadays. Any demand is acknowledged to create its supply, so there are many travel agencies, which results in a fierce competition in the segment. Therefore, being competitive happens to be a goal to attain. Although there are a plethora of factors that might have their impact on a general success of a travel agency, the finance issue appears to be crucial, so it is reasonable to consider the matter of a budget and its elements with regards to a travel agency.
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Being a calendar plan of all receipts and expenditures, the budget is expected to enable the administration of a travel agency to make decisions, outline plans, and exercise control in the course of management. Hence, the budget tends to influence the demand for resources which are necessary to get predictable receipts (Guess, 2015). Two types of budgets are distinguished: operational and financial (Finkler, Smith, Calabrese, & Purtell, 2013). In a travel agency, the base for the operational budget might be provided by the following elements: sales budget, remuneration budgets (separate for its constants and permanent parts), a rent budget, ongoing overhead costs, a plan of special occasions (including marketing and investment plans), depreciation reserves, and a tax budget. The financial budget of a travel agency should contain the prognosis on the review of financial results, the prognosis on the review of movement of funds, and the prognosis on the balance sheet. The latter should take into account the seasonality of sales which is a peculiarity of the segment. A budget arranged top-down is acknowledged to involve the collection of the budget information from a responsible employee to the supervisor and then to the management (Keating, 2016). However, for a travel agency, it might be more reasonable to introduce a budget arranged down-top because it is asserted to require a clear insight into major peculiarities from the management as well as the administration’s ability to give a realistic prognosis for the period under consideration.
A budget structure proves to be necessary to form a hierarchy of budget elements (Schwartz, Westerbeek, Dongfeng, Emery, & Turner, 2016). First, the responsibilities are divided between structural departments of a travel agency. Second, the formation of joint receipts and expenditures creates the hierarchy comfortable for consideration of different calculations. Third, a fiscal budget is formed, which means the structure includes items related to the movement of funds in a travel agency.
The seasonality of the segment entrains the necessity to touch upon long-term budgets and short-term budgets. The administration of a travel agency should be implemented through a month-long budget, as it supplies the best criteria for current decisions. Analyzing the month-long budget entrains corrections to both the perspective and a long-term budget. The latter is supposed to provide major landmarks for the main indexes, whereas it is aimed to determine the general financial strategy (Gupta & Gupta, 2017).
In conclusion, it is necessary to restate the main elements of the budget of a travel agency: receipts, expenditures, a financial result (deficiency or surplus), and principles of budget system construction. In the course of budget system development, it happens to be important to bear in mind the seasonality of the segment. Besides, since financial planning is tightly connected and guided by marketing and other plans, and is subject to the strategy, no financial prognosis is practically valuable until marketing and strategic solutions are elaborated.
Finkler, S. A., Smith, D. L., Calabrese, T. D., & Purtell R. M. (2013). Financial management for public, heath and not-for-profit organisations. Boston, MA: Pearson.
Guess, G. M. (2015). Government budget: A practical guidebook. Albany, NY: SUNY Press.
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Gupta, S., & Gupta, P. (2017). Evaluating maintenance budget for an AC plant under its contextual conditions. Journal of Faculties Management, 15(1), 1-18.
Keating, S. B. (2016). Financial support and budget planning for curriculum development or revision. Evaluation in Nursing, 8, 169-184.
Schwartz, E. C., Westerbeek, H., Dongfeng, L., Emery, P., & Turner, P. (2016). Managing sport facilities and major events. New York, NY: Routledge.