Originally Posted by
VOM1T
Further to my earlier post, an accountant friend has just pointed out to me that if a company has an overdraft, then the best time to pull the plug is when cash flow is at its highest, thereby reducing borrowings to a minimum and effectively using the most number of payments for future holidays to offset previous losses and debts to banks.. seems immoral .. but I'm a driver not a numbers jockey.. any thoughts from more qualified ppruners ?
This is correct. From the point of view of the person chasing their money which is overdue and likely to disappear for ever it is the sensible thing to do.
UK car dealers used to be prone to this, in the days when there was one registration change per year on August 1, and a peak of deposits put down with dealers in the months/weeks leading up to the change date, it was common for the banks, or the Inland Revenue, whoever was overdue their money, to go for winding-up proceedings on July 31.
For the UK tour industry, although the days when large numbers would book many months before departure are now history, this has been offset by the old practice of deposit with booking and final payment 8 weeks (or whatever) before departure disappearing as well. I can't remember the last time I bought any travel where it wasn't full pament with booking. So there is still a seasonality of cash flow which rises to a high point in early summer and then drops off through the rest of the year.
Quite why the CAA has never required proper compulsory Escrow of holiday monies paid to their licenced ATOL holders I am not sure. You can set the Escrow up so the interest on the monies in there (not a lot of interest nowadays, another problem) still goes to the operator.