Question

Sports Finance Questions

1. Compare and contrast various segments within the sport industry and how they handle financial issues.

2. Examine how sports facilities can become an economic engine for revenue generation.

3. Forecast the future of the sport industry based on changes in the sports broadcasting field.

Answer 1

Ans (1&2) Good financial management is key to any successful sports program. The way funds are managed, solutions to budget problems are issued, and understanding the most significant area within your specific program are the most important parts of financial administration. The person responsible for sports financing, sometimes titled a financial director, should have accounting experience and have knowledge in strategic planning, accountability, risk management and more.

Finance Administrator Responsibilities

• Monitor all money coming in and going out
• Understand the organization’s fundamentals
• Keep track of expenses, fees, donations, etc.
• Cut unnecessary expenditures from the budget
• Inquire into matters when needed
• Know the organizations policies and regulations
• View all previous financial statements
• Note significant expenses and asses whether they are realistic
• Devise a specific plan and maintain it
• Find the best insurance; price and quality
• Remain up-to-date on all tax related issues
• Prepare reports and submit them to the appropriate personnel

Budgeting

All organizations have a budget. The money they are allotted is broken up differently according to region and location, so it is important to be aware of how the money should be spent. Some areas prefer a stronger emphasis on one sport over another, or the budget is simply not large enough to accommodate very many alternate athletics options. This is where strict budgeting can come in handy. When you’re making your budget, remember to assess what areas require the most money, and to cut out any unnecessary expenditures. This frees up money for other athletics programs and keeps your organization from overspending where it isn’t needed.

A few tips for budget preparation:

• When are membership fees/dues, fundraising, and donations coming in?
  In spite of a set day for fees or dues, or when a fundraiser or donation is scheduled to come in, it may be late. It may take time for the money to be gathered and delivered, so allow your budget wiggle room for this.
• Are the expenses set a realistic level?
  Use prior reports to determine if the amount of money going out makes sense. If too much money is spent in one area, you won’t have the budget for other opportunities.
• Does the number of members effect the expenses?
  Some athletics programs require equipment or uniforms to be bought for each individual player. This causes the cost to be higher, so allowing new sports programs into your organization should have this factored into the decision making process.
• Set aside money for large expenses; emergency funding, gas and drivers for travel, drinks, hotels, and more.

Short-term and Long-term Budgeting

The major difference between short-term and long-term budgeting is relatively simple. Short-term is usually anything that refers to less than a year, and long-term is anything over that. Short-term expenditures are anything that you will have to pay money on now and that won’t be used again and again. This might be uniforms, food and drinks, gas money, insurance payments, etc. Whereas long-term might refer to large training equipment or vehicles. Setting a short-term budget first will show you how much money is left in the budget for long-term investments. It is pertinent to attempt to set aside enough money for both, but it is not always possible. This is where a sharp mind and determination come into play.

Forecasting

A forecast is a financial plan or budget that you create for your specific business. In this case, for the athletics program or organization that you are the financial administrator for. A large part of a successful organization is planning ahead for expenses while incorporating expected income. When you create your forecast, you form one for projected income and one for expected expenses.
After, you combine the two which gives you a cash flow forecast that will show you exactly how much money you need to have coming in to give you the money needed for all your expenses. It can also help to have these if you are applying for any government assistance or looking for sponsors. It will show them exactly, down to the dollar amount, what you need the money for. Be practical and responsible in what you deem as necessary, because potential sponsors and government officials will as well.

Planning

There is no specific way to create a budget, do forecasting, or to create a financial plan. This, while it would normally seem to make it more difficult, actually gives you room to create a plan that fits your specific organization. A financial plan notes predicted cash flow, assets, and works in accordance with net worth, tax liabilities, insurance, and much more. The plan you create will set out the ground work for all the money coming in and out of your organization.

Tips to remember when creates a strong financial plan:

• Determine where you want the organization to go.
  Set long-term end goals so that you know what direction to take your plan.
• Build your plan in increments.
  You won’t know immediately what plan works the best; trial and error is necessity.
• Set monthly goals.
  Give your plan some wiggle room. Determine what goals you want met on a monthly basis and do what you need to in order to meet them.
• Assess the impact.
  Before making any large changes, assess what those changes will do to your budget, forecast, and plan.
• Cover the difference.
  If you have to take money from one expenditures, find a way to make it up somewhere else.
• Adjust your plan.
  When something comes up, adjust your plan. It takes time to create a successful financial plan, so don’t be afraid to make changes along the way.
• Is the income higher than the expenses?
  It is important to pay attention to how much money you have coming in versus how much you have going out. If you don’t have enough, then you will have to make the appropriate adjustments.
• What other funding options do I have?
  There are many other funding options available to sports administrations. Government funding, sponsors, donations, fundraising opportunities. Try new things and don’t hesitate to look for the money you need in even the unlikeliest of places.

Financial Reporting

This varies from city to city and state to state, so it is vital to know the regulations relating to the area you are in. Some states require up-to-date financial reports be sent to them, as well as the IRS and city governments. If you work within a school that has different regulations than an NFL sports team, for example, knowing what is required to stay within the appropriate legal realms can save you unnecessary hassle and fines.

Ans (3) Over the last couple of decades, the sale of broadcast, and particularly television, rights for sporting events and competitions has become an extremely profitable activity, giving birth to a global industry worth about $30 billion (PricewaterhouseCoopers, 2011). Increased competition between broadcasters has inflated rights fees for many popular sports, which, in turn, has fundamentally altered the nature of these sports. For many sports organisations, selling their broadcast rights has become their main business activity and source of revenue. As discussed in more detail later in the book, regulatory changes (see Chapters 5 and 6) and new developments in technology (see below) have both fundamentally altered the supply and exploitation of sports programming, most notably triggering a struggle for platform leadership between rival broadcasters. In Europe, pay-TV operators started to outbid free-to-air broadcasters for key sports rights and began to provide extensive live coverage of a whole variety of sports events. More recently, convergent media players, including cable operators, telecommunications firms and online video platforms have emerged as potentially significant players in the sports broadcasting market. Desperately looking for a competitive edge, multimedia companies increasingly regard sports rights (or at least access to sports programming) as key to the overall value of their delivery platform and as a means to drive the take-up of bundled telecommunication and broadcasting services — thus highlighting the changing technological context in which sports rights are sold and exploited.