Mythbuster: It doesn’t pay to do business with government

There was a time when government was a notoriously bad payer, and even reports of some TMCs closing their doors as a result. For many years, it wasn’t unheard of to not receive payment for up to 120 days. However, hotels and TMCs contacted by Travel & Meetings Buyer said they are seeing a change in this regard.

Sailesh Parbhu, md of XL Nexus Travel said the number of travel agencies currently playing in this space stands testament to the fact that it is still a lucrative sector to be part of.

“Many of the national departments are putting in a lot of effort and trying to adopt different gateways, like lodge cards, and implementing these solutions to ensure that they don’t frustrate their TMCs in terms of managing their cash flow.”

Protection is also afforded to companies doing business with government by way of the Public Finance Management Act no. 1 of 1999, which states that government departments are required to pay a compliant invoice within 30 days of receipt.

A hotel often frequented by government travellers said they also don’t see government as bad payers anymore. “Most of them book through travel agents, so we don’t see bad payments. We do however tend to get last-minute reservations and cancellations as well,” the reservations manager said.

While government is working hard to rectify this, it does mean that often the TMC’s need to dedicate manpower just to the handling of payments.  “You’ve got to have your finger on the pulse,” Parbhu adds, “If you tailor make your business solution based on their requirements, you probably will get a better result as opposed to submitting invoices once a month and expecting them to pay within 30 days. It is a volume-based business, and you’ve got to amalgamate your service offering based on each department.”

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