Financial Fair Play Will Help Us

[observer]

I'm not counting any chickens yet but just say we are in League 1 next season the new FFP rules will be having quite an impact by then.

At one stage League 1 clubs could spend as much as they want on wages I believe. There was a cap of 100 per cent of turnover it appears as well. That has been changed. It was reduced to 65 per cent of turnover last season.

Next season it reduces to just 60 per cent of turnover

The days of certain clubs having huge wage bills to buy themselves promotion long gone.

We would never want to spend more than 60 per cent of our income on wages I am sure as we are prudent and well run.

But this stops other clubs having too large an advantage over us. Creates more of a level playing field than ever before.

The bigger clubs will have more turnover than us but they are restricted regardless on their wage bill.

Plus income from Premier League and TV deals will prove to be more significant than ticket income season after next.

I seem to have discovered that we will get 360k from TV money next season. Compared to 240k this season.

However, the following season this is going to increase in League One due to a new TV deal and rumours appear to be that it will increase by 70 per cent. Ie that will become 610k.

With wages being kept down due to FFP it's a real chance for the club to continue the solid improvement.

We have good financial habits already which I'm sure will continue - but all around us other clubs won't be able to buy their way out of this League.

It's far more of a level playing field.

Average attendance in League One is 6900. That's where some of the turnover comes from.

Closer we can get to that with time the better.

[Deleted]

Bang on the button that observer !

[claymillman]

There is a good logic to what you say, but teams with sugar daddies can easily bypass the 60% rule by giving money to their club, by various means. They can not though offer the money as a loan I believe, which is a good thing. Fortunately there are not many sugar daddy clubs around right now. We could all name one or two I reckon, but I think we will be alright.

[Deleted]

Not sure how many rich clubs there are. But since they enforced salary caps in baseball the bigger clubs routinely ignore them. They are then fined and that money goes to the smaller or poorer teams. It is a solution of a sort??

[observer]

With FFP if a club goes over the threshold then they get put in transfer embargo which is a serious punishment

3 Championship clubs already facing that

It's not so easy to inject the income and pass FFP either

If the income is found to be any type of related party income it is discounted for FFP reasons

Even PSG or Man City couldn't find a way round that.

This FFP does have teeth that bite and should make football clubs more viable long term - we are good at that anyway

But added bonus for us is that it creates a far more level playing field within each League than we would have faced before

[Deleted]

Apr 13, 2015 20:30:35 GMT observer said:

With FFP if a club goes over the threshold then they get put in transfer embargo which is a serious punishment

3 Championship clubs already facing that

It's not so easy to inject the income and pass FFP either

If the income is found to be any type of related party income it is discounted for FFP reasons

Even PSG or Man City couldn't find a way round that.

This FFP does have teeth that bite and should make football clubs more viable long term - we are good at that anyway

But added bonus for us is that it creates a far more level playing field within each League than we would have faced before

I can't remember these scenarios and I am interested in reading more. Do you have details or links to where I can read up on that?

[cbh1]

Blackburn Rovers, Nottingham Forest and Leeds United are currently under Transfer Embargo I believe in the Championship.

It is not a complete ban on signing players but I cant recall the full rules of the embargo........something like if a player leaves they can replace but there are caveats on that in terms of how much they can spend on a replacement. Ironic thing is that Forest went under the embargo and then one of their fans won the SkyBet Transfer Fund competition and a £250k boost to their transfer pot! (They signed Todd Kane from Chelsea on loan with it)

[observer]

They are restricted to a 24 man squad. If they are under that they can only sign players upto 10k in wages but they cannot pay any kind of fee to sign them.

Ie they can only take free agents or loan players who don't have a loan fee attached

Once they have 24 they can't add any more regardless

If they let a player go from 24 man squad they can replace but only on 10k per week wages or less or 75 per cent of wages of the player they release upto a maximum of 10k per week

There will be different criteria for League One

I've not taken a close look yet

But it's already impacted Forest

[observer]

Here are the rules for League 1 and League 2.

It appears wealthy owners can add to turnover at this level but only if they are prepared to donate the money to the club rather than loan it which is what has happened normally and will be offputting for them as no legal way for them to get it back should they need to.

For sure big clubs are limited on what they can spend on wages. A club with a turnover 1m higher than us (which represents approx 3000 season tickets MORE than us)would only be allowed to spend 600k more than us on wages for example


Salary Cost Management Protocol (SCMP) explained 

Clubs in the League 1 and League 2 operate within a Spending Constraint framework termed Salary Cost Management Protocol (SMCP). SCMP limits spending on player wages to a percentage of club Turnover. In League 1 clubs can spend a maximum of 60% of their turnover on wages - in League 2, the limit is 55%. There are no restrictions (in themselves) on the amount a club can lose or spend on transfer fees. 

Initially introduced into League 2 in 2004/5 for guidance purposes, sanctions for breaching the SCMP thresholds were introduced during the 2011/12 season, with Swindon the first club to be sanctioned under the rules. 

The process is interactive with clubs providing the Football League with projections for the spending for the coming season. During the season the clubs provide regular updates on their Turnover and wage bill. Any club that is forecasting a wage spend within 5% of the figure will be scrutinised more closely. Where a club is on course to exceed the limits, the Football League will apply a Transfer Embargo. Crucially, a club doesn't have to overspend to incur the embargo, it only needs to shown to be heading for an overspend. This interactive approach enables clubs to increase their wage bill if their circumstances improve - a successful cup run will generate increased income and the Football League may be able to sanction additional wage spend. Because SCMP doesn't rely on the retrospective scrutiny of club accounts, it is also extremely effective at stopping overspend before the spending actually occurs (something that has been a problem for the Championship's version of FFP).

The Football League's website's explanation of the rules doesn't go into a great deal of detail about how they operate. However they have responded to enquiries and confirmed a number of areas that help us to better understand the rules. 

Relegated clubs 

The rules apply to all clubs and there is no moratorium for clubs relegated from the Championship. However, Transitional Arrangements are in place whereby clubs are allowed to exclude the wage costs of all players that the club signed pre September of the relegation season, if they were signed on contracts in excess of 3 seasons. 

Turnover definition 

Under the SCMP rules, the definition of 'Turnover' is particularly important as Turnover is used to determine the maximum wage-spend. Within a traditional accounting perspective, there are usually only three elements of turnover: 

Match-day Income 
Commercial Income (such as sponsorship) 
TV revenue (and any 'merit payments' based on league position)
However the Football League use a is broader definition of Turnover. Crucially, the FL Turnover figure includes donations from the owners to the club and injections of equity. Loans from club owners are understandably not included in the Turnover figure as these would result in growing club debts. up club debts.  In League 1 and League 2, a wealthy owner can therefore fund the club spending in a way that is not permitted in other divisions. Manchester City and Leicester for example seem set for punishment for their excessive losses (from UEFA and the Championship respectively) despite the fact that the owners have injected hard cash into the club to finance the spending.

Profit on player sales

Any profit made on player sales is included withinTurnover on a cash basis when the instalments are received. 

Player Wages and deductions 

Under SCMP, 'Wages' relates to player wages only (director remuneration and general club staff wages are not included in the SCMP calculation). Player wages included in the SCMP calculation relate to all contract players (full contract, non-contract, multiplicity etc.) and loan players. Wage costs for players loaned out to other clubs are deducted for the period of the loan. Wage costs for Youth players on a professional contract are also excluded (i.e. players that have been in the club’s Youth Development scheme and have been given a pro contract); they must be 20 years of age or under at the start of the season to be discounted from the SCMP calculation. 

Direct Costs incurred within Turnover 

Within Turnover, clubs can include such things as Hospitality/Banqueting income (whether it is match day or non-match day income). The direct costs have to be deducted to reach a figure that is submitted on the SCMP return. For Hospitality/Banqueting for example, the Direct costs are all costs directly attributable to put on a hospitality/banqueting event. This would include food & beverage, direct staff and cleaning costs such as laundry etc

[Deleted]

My word observer ! I understand it but its not over simple is it !
I think if you look at the majority of clubs in league 1 for next season they are not on the whole that much bigger than ourselves and we should be able to compete along side of them. Retaining league 1 status due to the rewards on offer financially in the following season though would I agree be very beneficial in continuing the progression of the club forward.

[observer]

Also worth saying at lower level Swindon already fell foul of this and were put in a transfer embargo as a result

The 60 per cent wage cap was voted in by club owners and chairmen and they want to keep wages down by and large

It helps them all and it certainly helps us by keeping the playing field more level

[claymillman]

A very good informative post Observer. It certainly is quite complex, but also attempts to be very fair. I think we will of course be one of the smallest clubs in league 1 (if we make it).There are other smaller clubs who are well run, and doing quite well. Rochdale being a good example.
I think Ben's business knowledge and prudence will see us do alright. Our main concentration as supporters is to encourage more people to become fans, either as new supporters, or switching support to us from other teams. Not an easy task, but a worthwhile one.

[Deleted]

Well, it seems the FA are not as useless and some say they are?

[observer]

I know a lot of Forest fans who spent last 18 months saying FFP will be unenforceable and not caring about the fact we were going to fail it

Now Forest are under embargo and resigned to having to find free transfers and out of contract players next season whilst their expensive contracts gradually run down

Compared to spending 5.5m on a striker (assombolonga) last season plus more on others

They are very depressed about next season as a result

[Deleted]

In theory this is a good thing, but is really going to make a difference to the big picture?

Hull were funded £145,000, that is a weeks salary for many players, half a week for some players.
And the clubs sanctioned in THIS story are not top of the pecking order and are still allowed to carry 22 or in one case 21 players. That is two teams.
And are none of the bigs boys breaking the rules?

www.bbc.com/sport/0/football/32666094

[Deleted]

I see AFC Bournemouth didn't seem to have too many issues with massive overspending? £25 million losses in the two seasons BEFORE this season.

However, I think the efforts being made will make things fairer in time.

Good effort from the very effective FA :-)

[observer]

You only have to look at the amount of players being released by clubs to see impact FFP is having

Milwall just released 18 players

Fleetwood released 12 players

Every club seems to be releasing far more than normal

We aren't because we've always ran a tight ship anyway

[Deleted]

FFP will definitely help us, we have been run prudently for years. Jimmy may well have an abundance of players to look at that may be at one time would have been out of the clubs reach. I suspect he may have identified a few top targets already.

[Deleted]

May 9, 2015 11:36:57 GMT @terraceman57 said:

Jimmy may well have an abundance of players to look at that may be at one time would have been out of the clubs reach. I suspect he may have identified a few top targets already.

I agree that Jimmy already has several targets identified. He has shown that he is extremely organised and forward-thinking. I have no doubt that he will pull one or two more Nassers out of the hat (players that we have never even heard of). And his manager friends at Liverpool and Man Utd may just help him with that!

[Deleted]

A Belgian court has imposed an interim order blocking European football governing body Uefa from activating new Financial Fair Play (FFP) rules.

www.bbc.co.uk/sport/0/football/33240826

Financial Fair Play: Uefa appeal against court ruling that could grant clubs an extra £10 million to spend on players

www.independent.co.uk/sport/football/european/financial-fair-play-uefa-appeal-against-court-ruling-that-could-grant-clubs-an-extra-10-million-to-spend-on-players-10340834.html