Salary Cap Management Protocol (SCMP)

Having briefly looked through the details, there are a host of practical issues with the requirements that, to me, make the whole thing fundamentally flawed and, unless I've mis-read them or missed something, it would seem feasible to me that there's a huge scope for the returns to be manipulated favourably by the submitting club.

The biggest flaw is that everything is done based on two submissions per season, both of which are forward-looking, rather than being based on historic data. For the 2023/24 season, the requirement is to submit a pre-season return by 16th June 2023, and then a Mid-Season return by 1st December 2023, both in the form of pre-set Excel workbooks. In other words, we've already made both our SCMP submissions for the season prior to the January transfer window opening so, at best, any figures that are produced will have assumptions regarding both the incoming and outgoing transfer activity in that window.

The requirements seem to have no post-season review of the accuracy of these submissions, although I would assume that the pre-season submission must include something of this nature relating to the previous season's return. However, there's at least half a season of actual results and a full transfer window to account for in that review, which would logically enable any club trying to account for them as having "we're not mind-readers" as the logical explanation of any significant differences.

The requirements also seem to be ignorant of several basic timing issues. There's more than one reference to 'replicating the club's annual accounts' within it's submissions, with management accounts being the fall-back source of data "if the club's annual accounts haven't been finalised by the club's auditor." The audited accounts for 2023/24 won't be filed with Companies House until circa February 2025, and the deadline for filing 2022/23 accounts isn't until 29th Feb this year, so that entire reference indicates a fundamental lack of understanding as to the reporting and filing of accounts.

Consequently, the exercise seems to be a process of submitting vaguely educated guesses, plus a list of assumptions, twice a season. Given that these guesses cover 12 months and 6 months of future activity respectively, I doubt that they'll be close to being an accurate predictor of the actual results that ultimately follow, so the logical 'trick' is to always ensure that the guesswork shows a compliant position based on vaguely reasonable looking assumptions, but which a club might have no plans to adhere to. It's essentially a weird box-ticking exercise which provides little actual value. It's hard to make accurate predictions without knowing the content of the submissions, but the 'trick' would be to always frame a reasonable looking set of assumptions around a submission that is compliant, regardless of how likely that scenario is in practice.

If clubs are being punished for retrospectively having guessed incorrectly when the following season rolls around then this seems grossly unfair. Unless you have totally predictable income and expenditure streams, then the chances of a company accurately knowing how it's year will out-turn after 6 months of the year have elapsed are slim, more so if the income streams are seasonal, such as for large retail outlets. The problem if you're a football club is that you have two totally unpredictable transfer windows each year, which makes the exercise largely meaningless overall.

So, the main thing I've taken away from reading these rules is that BFC should have already made both their SCMP submissions by 1st December last year. As long as both looked reasonable and indicated an expectation of being compliant, the actual events between 1st December and the end of the season, including this transfer window, are only relevant if they're being reviewed or followed up as part of the submission process for next season.

 

I'd argue the opposite position applies in most cases (unless Paul Conway was involved in the incoming transfer). For a selling club like ours, we'll typically be cashing in on good players reaching the end of their contracts, most likely having benefitted from an extension or re-negotiation at some point. We'll be replacing them with largely unproven prospects on much lower wages.

So, for example, I'd expect the salaries that we're paying to Jack Shepherd and MdG to be much lower than the ones we're losing for Mads Andersen and Liam Kitching.

 

Why would transfer fees paid be deducted from turnover? Maybe I'm misunderstanding something but isn't turnover just income?

 

SCMP figures for transfers are based on the actual amounts received and paid in that reporting period (so the outgoing and incoming installment payments). Within football club accounts, transfer activity doesn't form part of the turnover figure as it is treated as capital expenditure, the player contracts being classed as 'intangible fixed assets'.

Transfer activity forms part of the overall accounts, but not within turnover.

 

I prefer it in league one anyway

 

Ipswich owners have pumped in £43m, this probably explains to some degree why they’ve been able to compete.

 

How have they pumped £43 m in and still kept within SCMP

 

Very easily, undertaking a rights issue adds to turnover which in turn allows greater expenditure.

It’s no different to the rights issues undertaken by BFC but on a smaller scale.

 

So.why do clubs like e.g. Man City, Wednesday try to raise their turnover by over inflating naming rights, shirt sponsorship etc when all they needed to do was undertake a £500 million rights issue to get around the rules

 

Managed to have a very brief chat with Rob Zuk about SCMP this evening. Turns out that it's monitored in real-time by the EFL, so if they want to sign a player on a wage of £x, this will be checked against the submissions made as to whether it fits within the plan.

So, as well as having to basically predict 6 months into the future, the club have to ensure they only operate within the constraints they apply to themselves within their fortune telling exercise.

Sounds like a logistical nightmare for a club to have to administer, but not for the reasons I would have originally expected.

 

The complexity of that is a bit concerning given we are unable to even know who's eligible to play.

 

Premier League clubs are restricted to losses of £105m over 3 years. Rights issues can be used to plug the loss but they do not impact on operating losses. That’s why the biggest clubs try to engineer their turnover by having higher value sponsorship deals which may be linked back to the owners to inflate turnover and therefore offset losses and allow higher spending. All allegedly of course.

The rules on spending are quite different across league one, Championship and the Premier league.

 

so I’m assuming one of the ways to get around this would be to agree the sale for our outgoing players over one or two payment instalments (ideally one) and then phase the purchase of new players over as many as possible (say 5 instalments). therefore you can increase the net transfer spend in a given window to show a higher turnover and therefore allow higher wages for a temporary period until you move to the other structure. Needs a plan ahead and a bit of a gamble to reach the championship in a time window and you have to hope you have saleable assets if it doesn’t come off…