How to Forecast Cash Flow in a High-Growth Mode: SmarterTravel
Manage your cashflow with Agicap
SmarterTravel was founded in 1998 and is located in Cambridge Mass. Leveraging AI and machine learning, the startup is building consumer-centric online travel experiences which offer both a wide range of selection and personalised recommendations for booking hotels. The data-driven company made close to $18 million in revenue in 2023 and is expecting a significant growth in the coming years. This growth necessitated a new way to handle the cash flow issues which arise out of the specific nuances of SmarterTravel’s business model.
How SmarterTravel generates cash
Sayanthan Bhowmick, the VP of Finance for SmarterTravel, identifies two main sources of revenue for the company. One is the service to book hotel rooms on their platform, and the other is a subscription to a collection of travel blogs, where a team of writers publish reviews of hotel rooms and give travel tips. Almost 5 million active subscribers are among the loyal readership and when they log in for a popular recommendation to book a flight or a hotel, SmarterTravel makes money out of that. And the business is growing, with not close to 40 employees across the US and Thailand working for the TravelTech Startup.
Why SmarterTravel needs better control of their cash
According to Sayanthan Bhowmick, the cash flow challenges of SmarterTravel arise out of their business model, which is typical for travel arrangement companies: when someone books a hotel room via SmarterTravel, the company gets the money for the customer, but the hotel room suppliers are only paid when the customers check out from their rooms.
Hence there is a lot of cash sitting on the bank accounts of SmarterTravel. As Sayanthan Bhowmick explains it, It's important for SmarterTravel to understand how much is the exact liability, so that the finance team can figure out how much is the rest of the cash that can be used for operational deployment. And because the company operates on a very thin cash buffer, it’s of paramount importance to really know the runway and decide then in which project the money should be invested in, and what’s the potential cash scenario for it.
When Sayanthan Bhowmick joined the company, he realised that there were wrong decisions made due to an unclear management of the cashflow. So he tried to get a grip of the cash flow by building primitive Excel models to forecast the cash flow, outlining the daily cash in and daily cash out. But soon, he found it wanting: “It's not really dynamic. It doesn't consider how my actuals are changing from the actual forecast and it cannot update the cash flow forecast based on the actuals.” Eventually, the VP of Finance got fed up with creating a new Excel for every new scenario and struggling to have a daily cash balance.
Looking for the Perfect Cash Flow Management Solution
Sayantan Bhowmick startet to look for a cash flow management software and after many failed attempts and some companies even offering to build him something for an exorbitant price, he found Agicap. The software drastically changed his workload. While he used to spend six to eight hour a week on cash flow planning, now he his has to spend 10 to 15 minutes a day to check his cash balance situation. It has also become much easier to send custom reports to his CEO or to board members, if they request specific cash flow scenarios.
The VP of Finance can now also benefit from Agicap’s integration of the daily transactions from the bank and QuickBooks. Agicap learns to spot specific transactions from the bank and precategorise them effectively, so that Sayanthan Bhowmick knows how much his company is paying for different line items or different segments.
Now Sayanthan Bhowmick can focus his new spare time thanks to Agicap to improve other processes around financial transformation for SmarterTravel to grow in a healthy way.
