Lack of Cashflow puts clubs under duress

A lack of sufficient cash flow is one of the most significant issues that is currently causing sporting organisations and clubs to be placed under duress, despite a slowly recovering economy, according to leading Brisbane Accountancy firm, elliotts.
Partner of elliotts, Michael Ward, said a lack of available cashflow in sporting organisations and clubs results in a number of issues, including a club struggling to pay creditors, employees of the club, and fund capital improvements.
Ward told Australasian Leisure Management that "the problem is, for most clubs and sporting organisations, keeping track of their expense and revenue items, each operating according to its own highly uncertain timetable, can be a difficult and stressful exercise, and this is why cashflow management is failing to be done properly."
However, Ward believes that preparing monthly cash flow projections is just one of the things a club or sporting organisation can do to put their club on a steady cash flow footing.
"What many clubs fail to recognise is that Profit and Loss Statements and Balance Sheets prepared from their internal accounting program focus on book profit, not cash. Whilst it is vital to focus on the business' profits and asset position, it is also important to understand the flow of cash in and out of the bank account," Ward added.
"Sometimes a very profitable club or organisation can have poor cash flow, particularly if there is any delay in receiving revenue from its activities and a club needs to pay suppliers quickly. Also, clubs and organisations experiencing high growth can suffer from cash flow problems because of inappropriate financing or there can be a lag, as revenues grow and then the cash comes in."
According to Ward, the cash flow improvement formula for a healthy club should aim to drive immediate revenue collections, drive stock holdings down and maintain creditors at terms.
By doing so, he said, surplus cash exists to make asset purchases, pay debts, repay loans and save for future club improvements.
Ward suggested cash flow projections be prepared for one to five years as a minimum, depending on the clubs' needs.
"I would also advise clubs and sporting organisations to monitor the timing of their revenue collections closely and ensure that they follow up any unusual delays.
"By the same token, pay your creditors on time, taking advantage of their credit terms and any discounts offered for early payment."