This article on the importance of accounting in football and other sports is one of the articles on the importance of accounting series like; importance of accounting in schools and importance of accounting in churches. This is not a traditional debate of what method of accounting is best to show the true financial position of a football club. The aim of this article is to bring to spotlight the hitherto neglected fact that accounting has an important role to play in football and other sports. In as much as it is not my intention to delve into the debate of football accounting, I would however like to point out the fact that any football accounting method that bothers around showing the true cash flow of the club should be highly encouraged.
Most football clubs do not understand the importance of preparing high quality and transparent financial statements. This is why some football clubs cook up figures at random whenever there is a major event coming up like when the taxmen are expected or when new investor is being wooed. The accounting standard setters are not even helping matters as their silence on football accounting explains it all. Well, back to the main theme of this article that is to discuss the importance of accounting in football/ sport. Hence, the next paragraph will do just that.
SEVEN (7) REASONS WHY PROPER ACCOUNTING IS IMPORTANT IN FOOTBALL
- AVOIDANCE OF ACCOUNTING FRAUDS AND TAX AVERSION: a football club will not be accused of accounting fraud and tax aversion when it keeps her book clean and in accordance with the relevant accounting standards. Nobody wants to associate with any business that gets involved in shady deals. The business environment has come to realise the importance of business ethics and are ever ready to turn their back on any business entity that is investigated and found guilty of being socially irresponsible.
- BOOSTING THE MORALE OF BOTH PLAYERS AND FANS: players will put in their best while playing on the pitch if they are rest assured that their salaries will not be contested in any way at the end of the day. From the perspective of the fans, they will not feel cheated when buying tickets to watch their clubs play as they have an idea of what the club makes from them.
- ATTRACTING GOOD BRAND NAMES TO SPONSOR: people view you with positive mind if you are transparent in all your dealings including keeping your financial records. Since keeping good track of the finances in a club helps avoid bankruptcy, a football club that does not have control over its account will ultimately go bankrupt thereby making it difficult for them to attract mega sponsors. In fact, the existing sponsors will leave because of the fear of losing public confidence if they keep identifying with a failing establishment.
- ATTRACTING AND KEEPING QUALITY PLAYERS THAT WILL MAKE THE GAME MORE ATTRACTIVE: it is a well known fact that success begets success. It is the dream of all quality players to play for a financially solvent club. Except when playing for a charitable cause, footballers are just like every other professional that are largely motivated by financial rewards-this is debatable though.
- ASSISTING DIRECTORS IN PLANNING: planning is one of the main functions of management that club managers do on a daily basis. Through accounting information system, directors of a company can carry out sustainable financial planning. Quality strategic planning also cannot be meaningful without real input from the financial statement of an entity. In fact, the importance of accounting in planning cannot be overemphasised especially in football business that is highly capital intensive.
- PREVENTING THE RECURRENT ISSUE OF FOOTBALL CLUBS GOING BANKRUPT: through adequate annual report, stakeholders can easily identify potential business failure coming and take corrective action if it is within their jurisdiction to do so. Managers and directors of football clubs for instance get financial insight from the figures contained in the financial statement of the club they are in charge of.
- HELPING INVESTORS MAKE UP THEIR MIND EASILY: investors all over the world rely on accounting information to make informed business analysis that aide’s decision making. Apart from the benefit of having financial information to support their fundamental analysis, the investing public has now understood the importance of investing beyond making profits and are becoming increasingly aware of the need to be socially responsible as a company. This explains why responsible investing is now selling as a topic. It is through accounting that a football club can demonstrate to both existing and potential investors that it is not operating in ways that will harm the environment.
Not undermining any of the importance of accounting in football as discussed above, the overriding significance of football accounting is to keep stake holders informed on the financial status of the club. This is one major area where both football club managers and fan base are trading on different path. The fan base of a football club is the most important stakeholders in the industry and needs to be fully informed else, they might decide to hold back their loyalty which will in turn mean holding back their money. The irony however is that very few supporters; if at all there is have the necessary financial skills needed to interpret the financial statement of the club they support.