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Chapter 7: Refunds, exchanges, agency fees, and reporting.

SUMMARY

In today's world of very low airline commissions and commission caps, most travel agencies charge their clients fees for their services. Travel agency fees vary by agency and many types of sales do not result in a fee, especially if the travel product being sold generates a higher percentage of commission. Depending on the travel agency, fees may be processed and collected in different ways and the travel professional must understand the options.

Accounting is part of every business and travel is no exception. Almost all air sales are reported to ARC on a weekly basis. This can be accomplished by completing the sales report manually, by using third-party software, or by using ARC's reporting program, IAR. In addition to regular air sales, a travel agency's ARC report may contain other types of documents, some of which are issued by the agency, others originate with the vendor. Regardless of the method of ARC reporting, all entry-level counselors should have a general understanding of the procedure and how it affects the agency's cash flow.

OBJECTIVES

At the conclusion of this chapter, you should be able to:

* accurately complete a ticket refund transaction.

* accurately complete a Travel Agency Service Fee document.

* describe the different ways travel agency service fees can be processed.

* define the general procedures for ARC reporting.

* explain the cash flow of ARC reporting.

KEY TERMS

Agent Automated Deduction (AAD)

ARC report

Area Settlement Bank

authorized amount

credit memo

debit memo

Interactive Agent Reporting (IAR)

recall commission statement

Refund-Exchange Notice (REN)

Sales Report Settlement Authorization

Sales Summary Adjustment Request(SSAR)

THE REFUND-EXCHANGE NOTICE

The nonaccountable ARC document called a Refund-Exchange Notice (REN), is used to process refunds and exchange transactions, and account for airline penalties or administrative fees. The REN is available in both manual (handwritten) and automated versions.

Tickets, e-tkts, MCOs, PTAs, and Tour Orders can be refunded or exchanged using an REN. However, a travel agency can only refund or exchange an ARC document that it originally issued; a counselor cannot process a document originally issued by another travel agency or an airline. The exception to this rule are airline-issued vouchers; a counselor may process an exchange of a voucher toward a ticket.

The basic rules for processing refunds and exchanges are:

1. All refunded amounts go back to the original form of payment.

a. The REN used for a credit card refund returns the funds to the original credit card.

b. The REN used for a cash or check refund returns the funds to the agency via ARC from the airline. The agency must then issue a check to the client.

2. Exchange transactions can be with an additional collection, refund, or even amount. a. If the exchange results in a refund, the amount goes back to the original form of payment.

b. If the exchange results in an additional collection, a different form of payment may be used, but most agencies request that the original form of payment be maintained.

3. Most airlines pay a commission on a penalty or administrative fee. For example, a penalty of $75 may result in a commission of $25. The commission on a penalty or administrative fee is almost always a flat dollar amount.

4. A ticket being refunded must be invalidated by printing "REFUNDED" across the face of all coupons. In the case of an e-tkt, the counselor may have to print the flight coupons, depending on airline.

5. A ticket being exchanged for another must be invalidated by printing "EXCHANGED" across the face of all coupons. In the case of an e-tkt, the counselor may have to print the flight coupons, depending on airline.

6. An exchange transaction can only take place when the validating airline on the old and new tickets are the same.

7. When processing an exchange transaction, the "issued in exchange for" and "original issue" boxes on the new ticket must be completed. The "commission" and "tax" boxes located near the bottom center of the new ticket and the "comm rate" box of the new ticket should show EXCH.

8. A separate REN must be used for each passenger.

The REN consists of four copies: cover sheet, Carrier's copy, Agent's copy, and Passenger's copy. The cover sheet includes basic instructions for use and should be removed and discarded. After completing the REN, the Carrier's copy is stapled in the top left corner on top of the ticket coupons being refunded. In an exchange transaction, the old flight coupons are on the bottom, then the Auditor's coupon of the new ticket, and on top, is the Carrier's copy of the REN (see Figure 7-1). Some agencies destroy the Auditor's coupon of tickets or e-tkts and in this case, the Carrier's copy of the REN may also be destroyed.

The Agent's copy must be kept in the agency's files for at least two years. In an exchange transaction, the Agent's copy of the REN is stapled in the top left corner on top of the new ticket's Agent's coupon. The Passenger's copy is given to the passenger.

The completion of a REN is relatively simple compared to completing other ARC documents. Each box on the REN is labeled and in some cases, includes instructions for calculations. Figure 7-2 is a blank REN with the boxes numbered. These numbers correspond to the explanations that follow.

1. Enter your agency's ARC number.

2. Enter the date you are processing the REN.

3. Enter the name of the passenger as it appears on the document being refunded or exchanged.

4. For credit card transactions, enter the name of the cardholder if different from the passenger.

5. For credit card transactions, enter the card type code and the account number. If the form of payment is cash or check, leave this box blank.

6. Enter "0" for a refund transaction. For an exchange transaction, enter the total cost of the new ticket.

7. Enter the base fare being refunded. This can be the full base fare of the ticket or a partial amount. In an exchange transaction, enter the full base fare of the old ticket.

8. Enter the tax or fee code (US, XF, ZP, etc.) and amount from the ticket being refunded or from the old ticket in an exchange transaction. If taxes or fees must be combined, use the code "XT."

9. Enter the total of boxes B, C, D, and E. This amount equals the total cost of the old ticket being exchanged or the amount being refunded, not including any penalties.

10. Enter the result of subtracting box F from box A. Circle the minus sign (-) in a refund or exchange with refund situation. Circle the plus sign (_) in an exchange with additional collection transaction.

11. Enter the airline penalty or administrative fee. If no penalty or fee applies, enter "0."

12. Enter the total of boxes G plus H. Circle the minus sign to indicate a refunded amount; circle the plus sign to indicate an additional collection.

13. Enter "0" for a refund transaction. Enter the amount of the commission earned on the new ticket in an exchange transaction.

14. If applicable, enter the amount of the commission earned on the airline penalty or administrative fee. If there is no penalty or fee, enter "0."

15. In a refund situation, enter the commission amount that is to be returned to the airline. For an exchange, enter the amount of the commission received on the old ticket.

16. Enter the amount of the commission due the agency and circle the plus sign, or the amount of commission to be returned to the airline and circle the minus sign.

17. Check the type of transaction for which the REN is being used.

18. Enter the flight coupon numbers being refunded or exchanged. For example: 1 2 3- or 1 2-4. Enter the three-digit airline code followed by the document number.

19. In an exchange transaction only, enter the three-digit airline code, document number, and check digit of the new ticket. For a refund transaction, leave this area blank.

20. Enter the airport code and amount of PFCs being refunded or from the old ticket in an exchange.

[FIGURE 7-1 OMITTED]

[FIGURE 7-2 OMITTED]

[FIGURE 7-3 OMITTED]
Refund-Exchange Notice
(REN)

A nonaccountable ARC
document used to process
refunds and exchange
transactions via the ARC
report.


TRAVEL AGENCY SERVICE FEES

More than half of all U.S. travel agencies charge their customers service fees. Collection of these fees is easy when the client pays by cash or check; the fee amount is simply added to the cost of the travel product being purchased. Clients who pay by credit card create an interesting situation for the agency. If the agency is a credit card merchant, the agency can collect the fee amount directly from the credit card company. However, most travel agencies are not credit card merchants.

ARC has developed two methods of service fee collection to assist travel agencies. The first method is the use of the Travel Agency Service Fee (TASF) document. The TASF is available in manual (see Figure 7-3) and automated versions and is supplied by ARC. There are three copies of the TASF: Agent's Coupon, Auditor's Coupon, and Passenger's Receipt. The manual version must be imprinted with the date, agency data, and credit card. These documents are reported to ARC in a separate report, ARC invoices the credit card companies, and pays the travel agency for the service fee, less the credit card charge.

The other method of collecting service fees is the use of a Miscellaneous Charges Order (MCO), in either the manual or automated version. Most of the CRSs support automated MCOs and this is by far the most efficient method of collecting agency service fees. As you might imagine, creating an automated MCO is much less time consuming than writing one by hand. Regardless of the type of MCO used, these documents do not require a separate ARC report; rather, they are simply combined with all other ARC sales.

Travel counselors processing services fees, either on TASFs or MCOs, must obtain an approval code (authorization) for the credit card charge. When automated fee documents are printed, the CRS obtains the approval code and prints it on the document. For manual transactions, the travel counselor may obtain the approval code in the CRS or by calling the credit card company.

REPORTING AIR SALES

A few U.S. travel agencies are not appointed by ARC; rather, they have obtained appointments from each airline separately. As part of the appointment, sales reporting procedures are established and reporting can be done weekly, biweekly, or monthly. The non-ARC agency must prepare a list of sales and transfer payment for each airline it has sold during the reporting period. As you might imagine, this type of reporting can be a tedious and time consuming task.

One of the most important functions of ARC is the centralization of reporting ticket sales and making payments to the airlines. U.S. travel agencies that have been appointed by ARC report the sale of tickets, e-tkts, MCOs, PTAs, and Tour Orders once a week to ARC. ARC withdraws funds from the travel agency's bank account, invoices the credit card companies on the airlines' behalf, and pays the appropriate airlines. The ARC report is completed in one of three ways.

1. Automated by using IAR (Interactive Agent Reporting) in the CRS or on ARC's Web site--no paperwork is sent to ARC and the Auditor's coupons may be destroyed.

2. Automated by using third-party software--computerized printout, Sales Report Settlement Authorization, and Auditor's coupons are sent to ARC.

3. Manually--adding machine tapes, Sales Report Settlement Authorization, and Auditor's coupons are sent to ARC.

The weekly ARC report includes sales from 12:01 a.m. Monday to midnight Sunday. Regardless of how the ARC report is processed, it must be submitted electronically or postmarked no later than Tuesday of the following week. Special consideration is given when a national holiday falls on Monday; the deadline for the ARC report is then Wednesday. These deadlines are detailed in the ARC Industry Agents' Handbook.

Travel agencies that use the TASF document must prepare a separate, manual report. These documents cannot be included in the regular ARC report, regardless of how the report is processed. Travel agency service fees that are collected on MCOs, either manual or automated, are included with the regular ARC report.

At the time a travel agency is appointed by ARC, it authorizes the Area Settlement Bank (a division of ARC) to withdraw funds from the agency's bank account. Area Settlement Banks are located in Louisville and El Paso. The location of the travel agency dictates which bank it uses. Unless the travel agency uses IAR, all paperwork is mailed to the assigned Area Settlement Bank.

Important Industry Web Sites

Airlines Reporting Corporation: http://www.arccorp.com

Alpha: http://www.sectormicro.com

GlobalWare: http://www.globaludyog.com

Lanyon: http://www.lanyon.com

Third Party Solutions: http://www.sessionware.com

Trams: http://www.trams.com

TravCom: http://www.travcom.com

Unisys: http://www.unisys.com/travel

You already know about the ARC documents issued by travel counselors that are included on the sales report. There are some other types of documents that are included in the ARC report as well. These include:

* Agent Automated Deduction (AAD)--issued by the travel counselor when not enough commission was claimed on a previously reported sale. The AAD is used when the additional commission is less than $25.

* Credit memo--issued by an airline when the airline owes the travel agency money.

* Debit memo--issued by an airline when the travel agency owes the airline money.

* Recall commission statement--issued by an airline when the travel agency must return a previously collected commission.

When a travel agency has been underpaid by more than $25, a Sales Summary Adjustment Request (SSAR) must be completed. This form is mailed directly to the airline; it is not part of the ARC report. After the airline receives the SSAR and determines that the agency is due the money, the airline sends the agency a credit memo.

Manual ARC Reporting

Depending on the travel agency, each counselor may take turns preparing the ARC report or it may be done by the manager. Before the report can be processed, the counselor must arrange, separate, and batch all documents (see Figure 7-4).
FIGURE 7-4 Steps for preparing a manual ARC report

1. Separate all documents by type:

    Automated tickets, e-tkts, exchanges, and voids
    Manual tickets, exchanges, and voids
    PTAs, exchanges, and voids
    MCOs, exchanges, and voids
    Tour Orders, exchanges, and voids
    Cash refunds and exchanges with refund
    Credit card refunds and exchanges with refund
    Debit memos, Recall Commission Statements,
      Credit memo, and AADs

2. Arrange each document type numerically.

3. Verify by document number that all are present.

4. Separate all documents into five batches:

    Cash Auditor's coupons
    Cash Agent's coupons
    Credit card Auditor's coupons
    Credit card Agent's coupons
    Voids


After completing the preliminary steps, the counselor has five batches: cash Agent's coupons, cash Auditor's coupons, credit card Agent's coupons, credit card Auditor's coupons, and void documents.

The next step is to run an adding machine tape on each batch, except the void coupons (see Figure 7-5). An adding machine tape can contain no errors; if a mistake is made, a new tape must be run. The Agent's and Auditor's cash tapes must be equal and the Agent's and Auditor's credit card tapes must be equal.
FIGURE 7-5 Sample cash and credit card adding machine tapes
for a manual ARC report

Cash Tapes--one
for Auditor's, one
for Agent's coupons

+ Automated tickets and e-tkts including: cash
or charge even exchanges, cash exchange
with additional collection (+), and cash
exchanges with refund (-)

+ Manual tickets including items listed above

+ PTAs, MCOs, and Tour Orders (in order listed)

Subtotal

+ Straight refunds

Subtotal

+ Debit memos, Recall Commission Statements

+ Credit memos, AADs

TOTAL

ABC Travel
123 Main Street
Washington, DC 20007
00 12345 6
Auth# 223344
12/16/01

Figure 7-5 Sample cash and card adding machine tapes
for manual ARC report

Credit Card Tapes--one
for Auditor's, one
for Agent's coupons

+ Automated tickets and e-tkts including:
exchanges with additional collection (+),
exchanges with refund (-)

+ Manual tickets including items listed above

+ PTAs, MCOs, Tour Orders (in order listed)

Subtotal

+ Straight refunds

TOTAL

ABC Travel
123 Main Street
Washington, DC 20007
00 12345 6
Auth# 223344
12/16/01


The counselor must leave about two inches at the bottom of each tape. As you can see in Figure 7-5, the agency's name, address, and ARC number must be added to the tape. The report period ending date (always a Sunday) is written on the tape. Each agency establishes a numbering system for ARC reports and this is used as the authorization. Each tape is secured to the applicable batch with a rubber band.

The Sales Report Settlement Authorization must first be imprinted with the agency data and report period ending date. The cover sheet is then removed. The Area Bank Copy is sent to ARC with the Auditor's coupon batches. The other two copies are for the travel agency. Figure 7-6 is a completed Sales Report Settlement Authorization.

Notice the authorized amount on Figure 7-6. This represents the maximum amount of money that ARC can withdraw from the travel agency's bank account. Most agencies simply use the cash sales total as the authorized amount. This does not mean that ARC will withdraw that amount; remember, it is simply the maximum that it may withdraw. The ARC Industry Agents' Handbook gives examples of other calculation methods for determining the authorized amount. Figure 7-7 illustrates how ARC calculates the actual amount to withdraw from the travel agency's bank account.
FIGURE 7-7 Sample calculation for ARC's funds withdrawal

Cash Sales: 14,000 (13,023.26 commissionable)

Commission on Cash Sales: 651.16

Credit Card Sales: 22,900 (21,302.33 commissionable)

Commission on Credit Card Sales: 1065.12

    Cash Sales                    14,000.00
    Commission on Cash Sales        -651.16
    Commission on Credit Sales     -1065.12
    ARC Withdrawal                12,283.72

Note: Tax and commission percentages used in these
calculations are for demonstration purposes only.


Now, the agency's copies of the Sales Report Settlement Authorization are placed with the Agent's batches and voids. Usually all of this is secured with a rubber band and then filed. Remember, the agency must keep these for at least two years. The Auditor's batches and the Area Bank Copy of the Sales Report Settlement Authorization are held together with a rubber band and are packaged and mailed to the Area Settlement Bank. Travel agencies should use a sturdy envelope or box for mailing, and many agencies use a Certificate of Mailing as proof that the report was mailed before the deadline.

Within 10 to 14 days, the travel agency will receive an Agent Sales Summary. This is a computerized list of all reported sales including base fare, tax, total, commission, and net remit (amount due ARC) for each sale. The summary also totals sales by document type, domestic and international commission percentages, and airline. The agency manager or senior counselor compares this printout to the submitted report. Any discrepancies noted are checked, corrected, and resubmitted if necessary.

At the same time, ARC withdraws funds from the travel agency's bank account via an electronic funds transfer (EFT). If the commission due the agency exceeds the cash sales, ARC will deposit the commission into the agency's account using EFT.

Interactive Agent Reporting

Interactive Agent Reporting (IAR) is an electronic method of reporting sales and was developed by ARC with input from travel counselor advisory groups. ARC offers this method of reporting free of charge to all agencies that use any of the four major CRSs.

All sales made in the CRS for ARC member vendors are automatically entered into IAR. Manually issued documents can be added to IAR by the counselor making the sale or by the counselor responsible for ARC reporting.

Perhaps one of the most important features of IAR is that documents with errors can be corrected before the weekly report is transmitted. Errors in the agency's favor on manual reports may not be noticed at all and those that are, must be corrected by hand and resubmitted. This feature of IAR can save travel agencies a great deal of time, effort, and money.

Another way in which IAR saves travel agencies time and money is that no paperwork is sent to ARC because the reporting is done electronically. So, there is no postage cost and no one must make a trip to the post office each week. Lastly, once a counselor becomes familiar and comfortable with IAR, preparing the ARC report takes much less time than doing it manually.

Using IAR is covered in the ARC Industry Agents' Handbook and there are several ways a travel counselor can obtain assistance with IAR.
IAR Assistance

Amadeus: GGAMAUSIAR
Galileo: HELP IAR
Sabre: F*TTL/IAR
Worldspan: INFO IAR
Customer Support Center: 703.816.8003
ARC Web Site: http://www.arccorp.com
   Training workshops and online registration
   Hands-on Interactive Training Tool (CD-ROM)
   IAR Demo
   Training resources
   Help News Tips

? What Would You Do?

Your client purchased a refundable ticket on Monday and paid for it by
check. Three days later, he tells you that he has to cancel his trip
and he would like his money back.

1. Will you process an REN and write a refund check to your client?

2. Will you process an REN and tell him that in 10 to 14 days you
can refund his money?

3. Will you void the ticket transaction and issue a refund check?

ARC report

A manual or electronic
weekly report of a travel
agency's sales.

Area Settlement Bank

ARC's processing center for
a travel agency's weekly
sales reports.

Agent Automated
Deduction (AAD)

A nonaccountable ARC
document used to claim
additional travel agency
commission via the ARC
report.

credit memo

An airline issued document
used to pay a travel
agency's undercollected
commission via the ARC
report.

debit memo

An airline issued document
that is used to collect
additional funds from a
travel agency via the ARC
report.

recall commission
statement

An airline-issued document
that is used to collect travel
agency commission via the
ARC report when air travel
is refunded directly from an
airline.

Sales Summary

Adjustment Request (SSAR)
A nonaccountable ARC
document that is used to
request additional
commission from a vendor.

Sales Report Settlement
Authorization

A nonaccountable ARC
document that is used to
report a travel agency's
weekly sales.

authorized amount

The maximum amount that
the Area Settlement Bank
may withdraw from a travel
agency's bank account to
cover its weekly sales
report.

Interactive Agent

Reporting (IAR)
ARC's automated travel
agency reporting program.
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Article Details
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Title Annotation:SECTION II: United States Air Travel
Publication:A Guide to Becoming a Travel Professional
Geographic Code:1USA
Date:Jan 1, 2005
Words:3787
Previous Article:Chapter 6: Basic ticketing and prepaids.
Next Article:Chapter 8: Accommodations and rental cars.
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