As the coronavirus pandemic continues to impact the sporting world on a global scale, Paul Atkinson, restructuring partner at specialist business advisory firm FRP, discusses the steps that sports clubs can take to help prepare for the months ahead.
Sports clubs up and down the country, are continuing to face daily stresses and strains caused by Covid-19 disruption.
Clubs of every size, and across every sporting discipline, are still striving to evolve, safeguard their employees both on and off the pitch, and adapt their match schedules and operations to new ways of working through a crisis that even the most watertight continuity plans couldn’t have prepared for.
Against this backdrop, it’s important that sports clubs prepare to ensure they’re in the strongest possible position to operate in such uncertainty and know the steps they should take if initial fractures become a crevice.
But unfortunately, none of us can predict what will happen next. We don’t know how long it will take for the global sports market to bounce back from the pandemic, and the sporting world is continuing to face its own unique challenges and pitfalls, with a long list of postponements and cancellations to matches and events, having to continue to play without spectator support, and restrictions on international travel to name but a few. But for any sports club facing difficulties, there are things they can do to help navigate current uncertainty.
The savviest club directors will:
· Map out potential risks and have robust contingency plans in place
Across the board, directors should be watching what the wider sporting market is doing and consider where their club’s operations may need to change in order to adapt to market conditions – both in the short and longer term.
· Manage creditors and monitor the health of the supply chain
When it comes to managing creditors, clubs should look to maintain as neutral a working capital position as possible by matching debtor receipts with creditor payments. It’s also important to sustain internal credit control procedures to increase debtor payments. For example, creditors may require the payment of a portion of existing debts ahead of supplying again. It’s also worth paying close attention to the health of the supply chain – if something drops out suddenly, it will be important to have plans in place to ensure the club can continue to operate.
· Maintain a clear distinction between funding the working capital requirements of the club and funding its losses
Keeping an eye firmly on forecasting is essential to manage the situation well. A 13-week short-term cash flow model should be prepared and maintained to aid the operational and financial management of the club.
· Use longer-term, integrated, financial models
Profit and loss, balance sheet and cash flow should also be developed as part of a club’s scenario planning and stress testing. Consideration should also be given to any deferred liabilities, such as rents and HMRC arrears, that will become payable in the short and medium-term. Equally, as the Government's furlough scheme finishes at the end of this month, and with the launch of the new Job Support Scheme, which will run for six months from 1 November, clubs need to understand how these initiatives may affect the club and its payroll efforts and have sound HR management in place to make sure employee wellbeing is prioritised during these tough times.
· Practice good communication with key stakeholders
Whether this is for employees, suppliers, spectators, shareholders, lenders, landlords or pension fund trustees, good communication is essential. Our natural human reaction when under pressure can be to hide from the problem. But starting, and maintaining, an open and honest dialogue with stakeholders is key. Overall, everybody appreciates we're in a very unusual situation, and transparency will only be an aid to solutions.
When facing a problem, directors should try to develop a suggested way forward that can be shared with stakeholders to kickstart conversations. Even if they don’t agree with the plans, the proactivity will be appreciated, and it’s worth remembering that it’s also in stakeholders’ best interests to work with the club to try and achieve a favourable outcome.
· And finally, never underestimate the value of good people
Cultivating an ethos that prioritises people offers huge benefits for the operation of a sports club and can be an important factor in attracting investment. And this can be a real advantage as clubs try to navigate current uncertainty, with the ultimate trophy being how best to thrive in the new normal.
Author: Paul Atkinson, Partner at FRP Advisory