Idea to prevent clubs getting into financial trouble

[ariotofmyown]

Football clubs seem to get into trouble mainly because they spend money they haven't got on players.

Could this be solved by allowing clubs to only spend money they do have on players ie the cash is in the bank. How does this sound...

When signing any player, a club would have to put all transfer fees and wages for the entire contract into a centrally managed account. This account then pays both the selling club and the player at the agreed times. If the player is sold before the end if the contract, the club are reimbursed the remaining amount. Interest on the account could be used to help grass roots football.

With the separation of player costs and everything else, it should help clubs manage their finances more easily, as well as offering protection against owners who buy big, but can't fund wages. Would help prevent the gambling we see where clubs spend money they haven't got in order to hope they get promoted and get rich.

FFP would no longer be required as a safeguard against clubs spending above their means. Not that it does that anyway as plenty of clubs still end up skint and a few get lucky and rich before 3 years pass (Wolves and Bournemouth).

There would still be a concern of states using clubs as propaganda tools, but FFP hasn't helped here either.

Alone, the idea above would still mean the richest probably keep on winning, but that has always been the case. In terms of protecting clubs, can anyone see any obvious flaws in this approach? Or could it stifle a clubs ability to compete against others? 

[GenBr]

I wouldn't mind your system, but I would prefer it if a rich owner - Mel Morris - for example wanted to piddle away his cash on his beloved Derby County he be allowed to plough his own money into that central account if he wanted to. If the owner wants to gift money to the club without any expectation of it being returned I do believe they should be allowed to do so.

Also Bournemouth failed FFP and were fined for it. It just didn't really matter for them since they banked hundreds of millions in Prem money since then to more than cover the pitiful fine.

[richinspain]

13 minutes ago, ariotofmyown said:

Football clubs seem to get into trouble mainly because they spend money they haven't got on players.

Could this be solved by allowing clubs to only spend money they do have on players ie the cash is in the bank. How does this sound...

When signing any player, a club would have to put all transfer fees and wages for the entire contract into a centrally managed account. This account then pays both the selling club and the player at the agreed times. If the player is sold before the end if the contract, the club are reimbursed the remaining amount. Interest on the account could be used to help grass roots football.

With the separation of player costs and everything else, it should help clubs manage their finances more easily, as well as offering protection against owners who buy big, but can't fund wages. Would help prevent the gambling we see where clubs spend money they haven't got in order to hope they get promoted and get rich.

FFP would no longer be required as a safeguard against clubs spending above their means. Not that it does that anyway as plenty of clubs still end up skint and a few get lucky and rich before 3 years pass (Wolves and Bournemouth).

There would still be a concern of states using clubs as propaganda tools, but FFP hasn't helped here either.

Alone, the idea above would still mean the richest probably keep on winning, but that has always been the case. In terms of protecting clubs, can anyone see any obvious flaws in this approach? Or could it stifle a clubs ability to compete against others? 

A player signing a contract for say five years, and the club having that player's plus all the other player's wages available. It could (although is also probably not feasible) work with the transfer fee, but they are usually spread out in various payments for a reason.

[Shuff264]

Heard a sort of "wealth tax" was discussed.

Soft cap of £10m a year for example, if a club wants to spend more they can but every pound extra they spend they match in money to smaller clubs to level the playing field. 

Lets rich owners chuck money in if they want and helps support the clubs in greater need.

[ariotofmyown]

2 hours ago, GenBr said:

I wouldn't mind your system, but I would prefer it if a rich owner - Mel Morris - for example wanted to piddle away his cash on his beloved Derby County he be allowed to plough his own money into that central account if he wanted to. If the owner wants to gift money to the club without any expectation of it being returned I do believe they should be allowed to do so.

Also Bournemouth failed FFP and were fined for it. It just didn't really matter for them since they banked hundreds of millions in Prem money since then to more than cover the pitiful fine.

My system would allow Mel to spend as much as he wanted. If he wants to buy a player for 10 million plus 20 million wages over 5 years, stick 30 million in the central account and job done.

What a rich owner couldn't do though is buy a player for 10 million, with 1 million upfront and 9 million over 5 years, then announce the club is bankrupt in 6 months time as they can't afford to pay the wages, let alone the rest of the transfer.

[ariotofmyown]

2 hours ago, richinspain said:

A player signing a contract for say five years, and the club having that player's plus all the other player's wages available. It could (although is also probably not feasible) work with the transfer fee, but they are usually spread out in various payments for a reason.

I assume the reason that they are spread out is that the club doesn't have the funds available, but thinks they will in the future based on gate receipts, expected promotions, expected tv monies etc.

In a business, speculating to accumulate is a way to grow. In a sport, removing this gambling option could prevent teams going bust or having huge points deductions. If it was the same for everyone, then could still be a level playing field.

[ariotofmyown]

2 hours ago, Shuff264 said:

Heard a sort of "wealth tax" was discussed.

Soft cap of £10m a year for example, if a club wants to spend more they can but every pound extra they spend they match in money to smaller clubs to level the playing field. 

Lets rich owners chuck money in if they want and helps support the clubs in greater need.

I like that idea too. I can't see hard salary caps working as another country would just offer more. But if you knew that every pound you spent over a threshold would mean x % going back to your rivals, it could help to balance things out.

Maximum squad sizes surely should be brought in too. Crazy the likes of Chelsea can own so many players. Salary caps might help with this too.

[GboroRam]

5 hours ago, GenBr said:

I wouldn't mind your system, but I would prefer it if a rich owner - Mel Morris - for example wanted to piddle away his cash on his beloved Derby County he be allowed to plough his own money into that central account if he wanted to. If the owner wants to gift money to the club without any expectation of it being returned I do believe they should be allowed to do so.

Also Bournemouth failed FFP and were fined for it. It just didn't really matter for them since they banked hundreds of millions in Prem money since then to more than cover the pitiful fine.

OK. Look at the example of Gainsborough Trinity. New, comparitively wealthy owner takes over with delusions of taking the team up the divisions. Spends big, club has the highest wage bill in the league. 

Owner is diagnosed with terminal cancer. Withdraws from the club to spend his final months with his family. The money dries up and the club has to balance the books quickly. The club sinks down as financial problems begin to surface. 

Oddly enough the terminal illness hasn't seen him off after many years over the 6 months he was given, and his interest has transferred to a different club. It's almost as if he wanted out in favour of a new club. But I'm not so cynical as to believe he would lie about having terminal cancer. I mean, what kind of person would that make him? 

Imagine how much trouble you could cause if you were real, football wealthy (like Fatwaz only real) and just decided to turn off the taps. 

FFP/P&S is a bad way of managing a real problem - clubs spending way beyond their means. No control would be a bigger disaster. 

[GenBr]

40 minutes ago, GboroRam said:

OK. Look at the example of Gainsborough Trinity. New, comparitively wealthy owner takes over with delusions of taking the team up the divisions. Spends big, club has the highest wage bill in the league. 

Owner is diagnosed with terminal cancer. Withdraws from the club to spend his final months with his family. The money dries up and the club has to balance the books quickly. The club sinks down as financial problems begin to surface. 

Oddly enough the terminal illness hasn't seen him off after many years over the 6 months he was given, and his interest has transferred to a different club. It's almost as if he wanted out in favour of a new club. But I'm not so cynical as to believe he would lie about having terminal cancer. I mean, what kind of person would that make him? 

Imagine how much trouble you could cause if you were real, football wealthy (like Fatwaz only real) and just decided to turn off the taps. 

FFP/P&S is a bad way of managing a real problem - clubs spending way beyond their means. No control would be a bigger disaster. 

In the system we are discussing your scenario isnt relevant. All the money for wages and transfer fee goes in the central account first. The money would already be there even if the owner decides to leave. 

[GboroRam]

1 hour ago, GenBr said:

In the system we are discussing your scenario isnt relevant. All the money for wages and transfer fee goes in the central account first. The money would already be there even if the owner decides to leave. 

Not many businesses have that kind of cash. Mostly its built up in other investments. Nice idea but I don't think many investors will be able to put it in the bank like that. 

[ariotofmyown]

2 minutes ago, GboroRam said:

Not many businesses have that kind of cash. Mostly its built up in other investments. Nice idea but I don't think many investors will be able to put it in the bank like that. 

You may well be right, but if someone 'invests' in your club, you'd want to know they could actually pay the wages as well as some upfront amount of the transfer fees of their initial flurry of incomings. Hoping for promotion to provide money for the wages seems to much of a gamble when so many clubs suffer.

[Tamworthram]

16 hours ago, ariotofmyown said:

I assume the reason that they are spread out is that the club doesn't have the funds available, but thinks they will in the future based on gate receipts, expected promotions, expected tv monies etc.

In a business, speculating to accumulate is a way to grow. In a sport, removing this gambling option could prevent teams going bust or having huge points deductions. If it was the same for everyone, then could still be a level playing field.

It’s just normal business practice isn’t it? There can’t be many businesses in the world that could afford to put aside the wages for their staff for the next three, four or five years so to expect football clubs to sounds a little unrealistic to me.

[Tamworthram]

12 hours ago, ariotofmyown said:

You may well be right, but if someone 'invests' in your club, you'd want to know they could actually pay the wages as well as some upfront amount of the transfer fees of their initial flurry of incomings. Hoping for promotion to provide money for the wages seems to much of a gamble when so many clubs suffer.

It’s a nice idea it why would you expect them to put the money up front for future wages? As with most businesses, staff wages represent a major part of annual costs that would be paid for from annual income. Also, the theory may work if you have a new rich owner wanting to invest but what if you don’t? Would you expect the existing, possibly long standing, owners of other clubs to stump up future wages at the time of any new signing?

[ariotofmyown]

On 27/07/2020 at 08:22, Tamworthram said:

It’s just normal business practice isn’t it? There can’t be many businesses in the world that could afford to put aside the wages for their staff for the next three, four or five years so to expect football clubs to sounds a little unrealistic to me.

You are right in terms of businesses. But I don't want football clubs to be making money and gambling with the future like a business might do. If all clubs in the top 4 divisions had to follow the rules, then it should be the same for everyone. Wages might take a dip for 3 years or so whilst the clubs built up their cash reserves, but after that period, the same amount of money should be available as previously. It will just be actual cash rather than potential future earnings.

[Tamworthram]

35 minutes ago, ariotofmyown said:

You are right in terms of businesses. But I don't want football clubs to be making money and gambling with the future like a business might do. If all clubs in the top 4 divisions had to follow the rules, then it should be the same for everyone. Wages might take a dip for 3 years or so whilst the clubs built up their cash reserves, but after that period, the same amount of money should be available as previously. It will just be actual cash rather than potential future earnings.

Sadly football clubs are businesses and, in the same way, their future expenditure is generally financed by future income. You could call it gambling but it's just the way any entity has always operated. Come to think of it, individuals do the same whenever they take on a long term commitment such as a mortgage.

[ariotofmyown]

2 hours ago, Tamworthram said:

Sadly football clubs are businesses and, in the same way, their future expenditure is generally financed by future income. You could call it gambling but it's just the way any entity has always operated. Come to think of it, individuals do the same whenever they take on a long term commitment such as a mortgage.

The analogous version of a mortgage is a first time buyer working as an apprentice and asking the bank to lend him a million to buy a luxury mansion. The first year would just be barely affordable interest only payments that he had to use his credit card for. He hopes to be promoted to CEO in 12 months though, so he can afford the repayments.

Even in this example though, the bank would still end up with the asset when he couldn't repay. The only real loser is the guy who was now bankrupt and no one would lend to him again.

The current situation is that shady/hopeless owners gamble away the clubs followed by thousands of people. Their suffering is relatively minor compared to the community who loses their club/sees them plummet down the leagues.

Football clubs need to be run with business acumen, but I don't think they should be businesses, in the sense that they exist to make profit for their owners and shareholders.

[Van der MoodHoover]

7 hours ago, ariotofmyown said:

The analogous version of a mortgage is a first time buyer working as an apprentice and asking the bank to lend him a million to buy a luxury mansion. The first year would just be barely affordable interest only payments that he had to use his credit card for. He hopes to be promoted to CEO in 12 months though, so he can afford the repayments.

Even in this example though, the bank would still end up with the asset when he couldn't repay. The only real loser is the guy who was now bankrupt and no one would lend to him again.

The current situation is that shady/hopeless owners gamble away the clubs followed by thousands of people. Their suffering is relatively minor compared to the community who loses their club/sees them plummet down the leagues.

Football clubs need to be run with business acumen, but I don't think they should be businesses, in the sense that they exist to make profit for their owners and shareholders.

You're heading towards the community Trust type model. Isn't that how it operates in Germany?

There should be a role for mutual type organisations. The often  quoted nonsense in financial services is that mutuals are complacent, high cost models. What they usually mean is that they are more paternalistic companies who haven't sacked all the administrative staff and sent their jobs to Mumbai. 

[bimmerman]

I've got a better idea. Don't go telling anyone, or they'll get upset and report us to the EFL... 

.. Why don't we all sell our stadiums to ourselves, then get a betting company to pay the wages of a former England captain to play for us.. 

I reckon its a genius idea, just don't tell Leeds, they'll try and get cavani in the number 32

[Gee SCREAMER !!]

3 minutes ago, bimmerman said:

I've got a better idea. Don't go telling anyone, or they'll get upset and report us to the EFL... 

.. Why don't we all sell our stadiums to ourselves, then get a betting company to pay the wages of a former England captain to play for us.. 

I reckon its a genius idea, just don't tell Leeds, they'll try and get cavani in the number 32

Leeds won't do that surely . Not having moaned about it since Christmas.