Offer

That's not correct. It might be the case when talking about household stuff but not the case in a business context. Households tend not to run themselves using a P&L account!

I'll have to apologise in advance for the length of my explanation but it can't be addressed in soundbites!

The starting point is that when a business says it has a deficit (as Rahic recently said and Lawn had said on several occasions), it doesn't necessarily mean the club has no cash. It's simply a more acceptable way to some of describing the company as running at a loss (as against making a profit). And it is usually applied to the entire accounting year. Thus when Rahic was quoted as saying the club was running a deficit of £700k, he was slightly misquoted when he actually said 'we are expecting a deficit in this year of £700k' ie at the end of the season we will have made a loss of £700k. And just for completeness, a loss is made in a season when the costs attributable to that season are more than the income attributable to that season. I'll return to the bits in italics shortly.

Having no cash or running an overdraft is very different to running a deficit and can be far more serious in the short term. If any business doesn't have cash or cannot access cash (say an overdraft from the bank or equity or loans from its owners) or cannot generate cash from selling its assets to pay its bills or employees' salaries, then it won't stay in business very long! There are many examples of businesses which were profitable but went bankrupt because of cash flow. Carillion probably falls into this category. Equally there are big businesses which made losses over many years but were able to stay alive because they had ready access to cash to support then until they became sustainable. The likes of Facebook and Microsoft are great examples of this second category. As the mantra goes 'cash is king'!

Back to the comments in italics. the finance people in businesses go to great lengths to equate costs with revenues on a comparable basis and for a defined period, usually a 12 month period. Thus as an example, in our case, we receive season ticket income as cash before the season to which it relates. It all shows as income for the coming season since it relates to that season but as cash as it's received and stuck in the bank account, ie most of it is in the previous season. On the other hand, when we bought Wyke for £250k in Jan 2017 on a 21/2 year contract, and let's say for ease of argument that the cash for the transfer was paid to Carlisle on the day he left them. At the time that would have affected our own cash on the day it left the bank account. It would have put a huge dint in our bank account on that one day. But in terms of impacting the company's profit (or if you like deficit), the £250k is being spread (amortised is the way accountants refer to it) over the period of Wyke's contract since that's the period he'd be expected to play for us. In this example, in his first 6 months, it would have impacted on the deficit (or loss) by £50k, significantly less than the impact on cash flow.

I agree it's not always straightforward and it's therefore very easy for either people to misunderstand the situation or for others to deliberately confuse the issue. Small companies such as the club are very prone to cash flow issues and that's far more important in the short term than having a deficit. It is however quite worrying when clubs offer early bird discounts to encourage fans to part with their cash and for it to end up in the club's bank account before it might be needed. We've done this for years however and it isn't something which the new owners have suddenly invented. It does demonstrate however that the club has a continuing issue with cash flow and therefore needs to do this. It certainly creates breathing space on cash flow which would otherwise either have to be funded by an overdraft or more capital from the owners until unexpected income from a say a cup run or selling a player or cutting its costs has been delivered. Or if you like, it's the cash from cup runs or selling players for more money which helps the club to develop.

Apologies for the length of this reply but this is a very important to explain this in a little depth in our club's situation which hasn't had and doesn't have the benefit of a sugar daddy willing to routinely put extra cash into the club to sustain it. It still shows how the money raised from the LC run or the sale of Wells has had such a positive effect on us over the past few years and equally why our loss to Yeovil caused such a furore.

 

I do. As I said in my earlier post, this has been happening for years and I don't believe that doing it again marks a major change in our financial fortunes. Once we'd joined that particular roundabout, it's very difficult to get off again.

It does however illustrate that we don't have much spare capacity in our finances. To spend anything above our break-even as JR used to call it (or if you prefer, sustainable as Rahic uses) level means either gambling on another lucrative cup run, selling our only saleable assets (of which there are few), cutting our cost base even further or attracting additional investment into the club. None of that heralds a great future for me. And nor does it signal any fundamental change in how ML and JR used to run the club compared to how R&R do now.

 

GR put them on sale 25 years early!!!