BSP Remittance, a Chargeback and Client Money Under Pressure
Your IATA-accredited agency settles through BSP on a fortnightly cycle. For the period just closed: tickets issued £86,400 gross (including £9,900 of taxes, fees and carrier charges), refunds processed £4,150, and two ADMs totalling £320 received, one of which the agency disputes. Your largest corporate account runs on 30-day credit and owes £12,600 for tickets already reported in this period, but is not due to pay until the 25th. The BSP draft hits the agency account on Tuesday. Separately, a leisure client paid £2,400 by card for flights; the airline has since ceased trading and the client has filed a chargeback. Cash at bank is £19,800, payroll of £14,200 is due on Friday, and £30,000 of client deposits sits in the agency's separate client account.
1. Recompute the net BSP remittance, assess the cash position, and set out the order in which you would act.
Read the worked answer
Remittance: £86,400 − £4,150 + £320 = £82,570 payable to the BSP on Tuesday. ADMs increase the amount the agent owes; refunds reduce it.
Cash position: available cash £19,800 − payroll £14,200 = £5,600, against an £82,570 draft. Shortfall roughly £77,000 until the corporate account pays.
Order of action:
- Talk to IATA/the BSP before the draft date, not after. A failed draft can lead to default action - cash or guarantee requirements and, at worst, loss of accreditation. Early notice and a payment arrangement is a negotiation; a bounced draft is an incident.
- Chase the £12,600 now - offer a small early-settlement discount if that is cheaper than an overdraft; get a written commitment date.
- Use own working capital or a facility. Draw on the overdraft or invoice finance; the corporate receivable is a real asset.
- Pay the disputed ADM and dispute it afterwards through the ADM dispute process. Withholding part of a BSP draft to run a commercial argument is not a payment strategy.
- Do not touch the £30,000 of client deposits. That money is not the agency's and using it would breach client-money rules and could be a criminal offence in some jurisdictions.
2. The leisure client's airline has collapsed and they have filed a chargeback for the £2,400. Who bears the loss and what evidence and process matter?
Read the worked answer
Default position: the agency does, until it proves otherwise. In a card transaction the agency is the merchant of record; a chargeback reverses the funds and the agency must rebut it within the scheme's deadline. The airline's insolvency is not by itself a defence - the client paid the agency.
Evidence to assemble immediately:
- The signed booking form and terms and conditions (agency as agent for the carrier, not as carrier).
- Card authorisation data: 3-D Secure result, AVS/CVV checks, IP and device data. Full 3-D Secure authentication can shift liability in a "not authorised" dispute; it does not automatically win a "services not received" dispute.
- Proof the service was delivered: ticket numbers and coupon status, the e-ticket itinerary receipt issued to the client, correspondence.
- The airline's insolvency notice and administrator details, and the client's own remedies (travel insurance, and any scheduled-airline protection or package protection if the sale was a package).
Judgement: refund voluntarily where the agency's terms make it liable or the sum is small relative to the dispute cost - chargebacks carry fees and count against your ratio, and a lost dispute costs more than the ticket. Escalate to the acquirer early and log the deadline in the file. Store card data only in line with PCI DSS; do not keep full card numbers in email to "help" the case.
3. The bookkeeper suggests moving the £30,000 of client deposits into the current account to cover the BSP draft, "to be repaid after the corporate client pays". How do you respond?
Read the worked answer
Refuse, and put the refusal in writing.
- Client money is held on trust for the client for the travel it was paid for. It is not working capital and cannot be used to settle the agency's own trade payable, even for a few days with a clear intention to repay.
- Intent does not cure it. If the agency failed in that window, the clients' money would be gone, and in many jurisdictions misapplying client money is a specific offence as well as a breach of accreditation conditions (IATA, ATOL/ABTA-type consumer-protection schemes and similar regulators).
- It also corrupts the accounting. Trust/client accounts are reconciled separately, matched to client liabilities, and audited. Intercompany loans between them destroy the reconciliation and can invalidate the agency's financial criteria for accreditation.
Instead: bridge the £77,000 gap from own funds or a facility, accelerate the receivable, speak to the BSP before Tuesday, and review why the agency is selling on 30-day credit with fortnightly settlement - if the credit terms of the corporate account are longer than the settlement cycle, the gap is structural and will recur every period. Fix the credit policy, not the client account.