THE IMPORTANCE OF CREATING, MANAGING & MONITORING THE BUDGET OF A FOOTBALL TEAM
“Defined as the formal expression of plans, goals, and objectives of management that covers all aspects of operations within a designated time period, the budget is a tool used to provide targets and give direction.”
THE IMPORTANCE OF A BUDGETING STRATEGY
Constantly evolving markets and the exponential growth of economic dynamism are continuing to place an increasing level of importance on strategic planning within the success of an organisation, making it crucial for businesses to implement agile, flexible and fast approaches in order to keep pace with changes within the economic environment. Considered one of the main instruments used to measure the financial performance of a firm, the budget is a crucial element of the planning phase that can be used to set precise benchmarks and guidelines for the assessment and comparison of an organisation’s financial performance.
Similar to other industries, budgeting is a fundamental process for all football clubs regardless of their stature and individual revenues. The overall budget is comprised of the profit & loss account (P&L), balance sheet and cash flow statement, with the budgeting process consisting of the following steps:
- Identifying strategic and operative goals
- Assessing results obtained after taking action
- Evaluating the extent to which targets have been met
- Taking corrective action and beginning the next control cycle
HOW TO SET A BUDGETING PROCESS
Manageable in numerous ways with a variety of different tools dependent on the unique requirements of an individual club, the process used to set the budget is entirely dependent on the organisation in question. For example, a larger, more complex club may deem it necessary to make use of Enterprise Resource Planning (ERP) within their budgeting process, whereas a smaller club could feasibly manage all documents through an ‘Office’ package in shared folders stored on the cloud.
Once any sport related goals have been clearly outlined and set, the first step in the budgeting process is the construction of the P&L account and analysing current revenues (typically broadcasting, matchday and commercial) and expenditures (both fixed and variable). Following this, the depreciation of tangible and intangible assets should be calculated prior to assessing two main KPIs:
- Players’ salaries and players’ trading over P&L account
- Net gain after gain, losses and costs
HOW TO MANAGE A BUDGET DURING THE SPORT SEASON
The process of budgeting allows those in a position of management to assess the current status of projects, whilst outlining the direction the entire organisation should follow by setting achievable actions and priorities. In order to be both viable and obtainable, any goals outlined by a business must be coherent with any demands expressed by their respective internal and external environments.
Budgets for a sports business are generally planned between April and May, before the beginning of the following season, allowing for enough preparation time so that it can be presented to the board in June. The initial forecast, otherwise known as a budget revision, takes place in September after the summer transfer window and is repeated in February following the January transfer window. Between these two forecasts are also two intermediate quarters, Quarter 1 (up to 30/09) and Quarter 2 (up to 31/12). The same is applied after the February forecasting with Quarter 3 and Quarter 4.
HOW CAN ITERPRO CONTRIBUTE TO BUDGET MANAGEMENT?
With salaries accounting for approximately 60% of club expenditure and the total wage cost across Europe’s Big 5 leagues standing at €8.5 billion, football players represent a major financial asset of their particular organisation and each decision relating to them directly impacts the business. Supporting clubs in the management of player contracts in a complete, precise and fast fashion, Iterpro is able to assist management with punctually monitoring, tracking and predicting a players’ salary.
The management of the transfer market window significantly impacts the balance sheet and budgeting procedures implemented within a club, but with Iterpro it is possible to simulate transfer market activity and see any potential implications of future alterations to cash flows and, therefore, enables management to make informed and educated decisions surrounding transfer activity. With just a few simple clicks, the Iterpro solution shows projected cash flows for both previous and future seasons.
In a highly competitive environment subject to daily internal and external changes, Iterpro Football Intelligence is the first business intelligence solution that integrates data from every department and transforms it into actionable insights that can assist clubs in moving from athlete to asset management.
