The success of your business depends not just on your travel expertise and customer service, but also on the strength of your financial foundation. Positioning your travel business to thrive means managing your finances in a way that’s streamlined, sustainable and savvy.
We spoke to financial professionals to learn their best practices and actionable tips for travel advisors to utilize when managing their business finances — empowering you with the knowledge and tools you need to crush your goals.
1. Get a Bookkeeper and/or Bookkeeping Software
There’s no reason to wing it: You should invest in outsourcing your own bookkeeping, whether that means hiring a qualified professional or shelling out for software. A bookkeeper is responsible for managing and monitoring a company’s finances, including purchases and expenses, payroll and sales revenue. For many, this is a small investment that will free you up to do more of the kind of work at the core of your business. (And even this small cost likely qualifies as a tax-deductible business expense.)
Various widely available and easy-to-use bookkeeping platforms — like FreshBooks, QuickBooks Online and Xero — are stocked with tools for small business owners like travel advisors. Quickbooks Online has a feature that allows a CPA to access your reports, saving you time when it comes to working with that professional, too.
These apps are available on smartphones, have easy-to-navigate interfaces and offer reporting tools that are powerful for small business owners and freelancers. And with interfaces integrating payment platforms like PayPal and Zelle, they help make sure you get paid on time — or give you the information to follow up with clarity when you’re not.
CPA and tax expert Tom Wheelwright prefers to work with a human bookkeeper. “I don't want to waste my time doing something that is a really low cost. And somebody else can do it better than I can,” he said. “I find my time is more valuable to be spent on my business than doing bookkeeping and administrative things.”
That said, he advised working with a professional who uses software to which you have access so that you can view reports at any time. These reports can be critical to business operations and important to keep a pulse on, such as aging reports, time to payment, revenue by client, expense reports, total profit and profit by revenue stream, to name a few.
2. Use Professional Accounting Software
“When it comes to managing expenses, you definitely need an accounting software in place,” said Christian Maldonado, co-founder of the accounting firm Finsult.com. “I see too many businesses who are apprehensive to jump on a platform in the first year, but it really puts things into perspective when you see all of your expenses going out the door. A lot of business owners just don’t know how much their businesses spend, and accounting software helps account for all of those under-the-radar expenses so you can budget for operation and project cash flow and profitability.”
Once you’re comfortable with hiring a bookkeeper and you have accounting software in place, reporting add-ons like Fathom can add even more value when it comes to benchmarking and transparency.
Consider this sample workflow: A bookkeeper enters all invoices and expenses into the accounting software, empowering the business owner to then run sophisticated dashboards and reports in Fathom showing the financial health of the company over time — without double data entry. (All the major tools allow you to run reports, but a dashboarding add-on can take learnings to the next level for visual types.)
3. Take All of the Appropriate Deductions
Wheelwright encourages travel advisors who work from home to take the home-office deduction but reminds them to also track their expenses and mileage while on the road.
Restaurant meals are deductible when business is discussed — and Wheelwright underscored that business can reasonably be discussed with all kinds of dinner partners. “Sometimes a meal with a personal partner or spouse relates to talking over business — that’s still a deductible meal even if it’s with somebody that you know and like,” he said.
People who work in the travel industry have many potentially deductible expenses related to being out on the road. But if you’re not aware of them, or you’re not maximizing them, you’re leaving money on the table.
Note that rules for deducting travel vary by destination, Wheelwright said. For domestic travel, you have to spend 50% or more of your time on business. “You can’t just take your laptop on vacation and call it business travel,” he said.
If you spend many hours each day scouting local hotels in that location to potentially recommend to clients, 100% of that travel is deductible. But if you spend less than half of your time on business at the domestic destination, none of it is deductible. (International travel plays by different rules entirely and depends on the country you’re visiting.)
He added that the taxpayer has a choice between deducting actual expenses or a per diem based on the location. “If you’re pretty modest in where you stay or what you eat, per diem could be a bigger tax deduction than the actual expense,” he said.
Overall, “any expense that is used for the continuous operation of the business is deductible,” Maldonado said, whether that pertains to travel, advertising, marketing, printing or continuing education.
4. Document Everything
Your tax deductions are only as good as your documentation that supports them. “I always tell people, if you pretend to document it, you get a pretend deduction for it,” Wheelwright said. If you get audited, “the first thing the IRS will do is ask for documentation.”
He warned that a credit card statement does not qualify as a receipt. But printed receipts may fade over time and be “worthless to an auditor.” So, as you go, scan your receipts into any one of the many apps designed for the purpose. Many of the popular apps allow you to upload pics of your receipts right from your mobile phone — like when you’re running through an airport to catch a flight.
“For a meal receipt, you need to write down not just who you were with, but what you talked about,” he said.
Maldonado recommended this method: “If you get emails about every transaction you make through your business cards, just file them into an email folder. They’re easily accessible, you can search for them and you can print them on the fly if needed.”
5. Recalibrate as You Grow Your Business
You owe it to your business to continually reevaluate as you go — year after year, and even month after month.
If you’ve been in business for a long time — and things seem to be going well — there’s a tendency to just stick with what’s been working. “What many business owners don’t understand is they can actually keep more of their money” rather than send it off in the form of taxes, Maldonado said.
Let’s say you have a huge windfall mid-year — massive travel bookings related to a special event in a far-flung destination, for instance. “You can still open an S-corporation mid-year and have it count for that calendar year.” Or perhaps you might open a trust or get a rental property in your name to offset some of those taxable earnings.
There are many different vehicles and tax criteria that can determine just how much of your money you can keep — and the difference can be stark.
Reworking your company’s structure for tax purposes may not be glamorous, but it could be the path forward to managing your money as your travel advisory business grows, evolves and thrives.
“It’s not a small thing,” Maldonado said. “I'd rather be the guy that takes the time and spends the extra money to have a CPA sit down with me.”
Originally appeared in the Spring 2024 issue of The Compass magazine
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