The Reason Why Most Football Clubs Fail Financially
The problem of insolvency is common among all the businesses and industries and so is in the football industry. With the prominent repercussions of reduced competitiveness, low investment in infrastructure, and sanctions on the football clubs. Hence, impacting the overall performance of European football clubs. However, after the financial crisis of 2008, the inclination towards making policies to tackle any incidence of insolvency has increased. In this article, we will discuss all the causes behind these imbalanced financial cycles and policies that can assist in resolving these.
Causes Behind The Insolvency Of The Football Club
One important cause behind the insolvency of the football club is the lack of response management policy to tackle low-income situations. It was found that most of the clubs spend too much on improving the position of the club and pay less heed to the productivity of their club. Therefore, facing problems in maintaining the balance. Consequencing in financial distress.
Another important cause of financial distress in European countries’ football clubs is the low standard of accounting in the clubs. For instance, some clubs spent double the amount of revenue on hiring players without any calculation of the net amount of revenue built. Therefore, soft budget constraints and the absence of up-to-mark financial management policies are one big reason behind the financial imbalance in these football clubs. Most commonly found in Italian and French clubs.
However, in contrast to the above countries with clubs prone to financial distress because of their weak financial policies, the Spanish football clubs are at the upper end. As their great importance in the country let them avail themselves of the financial rescue policies provided by the local authority. These include direct earning attachments (deducting money from the salary ) and government easy loan terms and conditions. However, for getting advantage of these policies one must know what is direct earning attachment and its applications.
Pragmatic Solutions To Tackle Financial Failures
Direct earning attachment is a way of recovering debts or benefits overpayments from a person by deducting a standard rate of money from an employee’s earnings. This could be 20% or 40% of the earnings leaving at least 60% of the payment behind. The department of work and pension (i.e. DWP) is responsible for the proper execution of this DEA by sending direct notice to the employer to start the deduction procedure. Therefore, a legal but easy way to write off all types of benefits that are administered by the Department of Work and Pensions (DWP).
Other pragmatic solutions to tackle the financial instability of football clubs include skilled administrative bodies for clubs of football and interest groups arranged to deal with these financial problems. However, it is potent to give these bodies free access to financial status and the record of spendings and the earnings of a club. So, they can come up with better financial management along with high pace solutions to write off the loan.