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Is this the end of Portsmouth Football Club? Many fans and pundits think it could be, and this could all be down to cash flow problems.

It is reported by the BBC that due to Portsmouth’s insufficient ground capacity, the club relied heavily on TV payments to meet its monthly outgoings. When the Premier League withheld its TV payments in January 2010, the strain on the company’s cash flow was evident with players not been paid on time and management searching for new sources of finance. Accountancy Age reported that the club was looking to receive a cash injection before 17 February 2010 from an associate, but this never came. Cash flow is a key component in operating a successful business, and during a recession its importance cannot be understated.

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If you are regularly unable to pay suppliers or employees, then without restructuring your business and finances, the outcome will normally be insolvency. There are various cash management strategies that can be implemented (for example, re-negotiating supplier terms or selling non-core assets) to give a company some breathing space.

In late February 2010 Pompey then became the first Premier League club to enter administration with debts of around £60million and were deducted nine points, which saw them relegated from the top flight, losing the vital TV payments.

Portsmouth FC eventually came out of administration to only slip back into it in February 2012. They once again had points deducted and have now been relegated to the third tier of English football. Going into administration twice in three years has almost killed off Portsmouth Football Club. At present, Pompey maintain an annual wage bill of £12 million and their players have recently been asked to take wage reductions in order to keep the club afloat. They are preparing to offer redundancy to many of their staff in order to cut this huge wage bill.

Read this article on the BBC website and then watch the 2 minute video at the bottom, then answer this question in the comments section:

http://www.bbc.co.uk/sport/0/football/17859429

Mr King’s Question

How has a poor cash flow position almost caused the end of Portsmouth Football Club? What factors caused their terrible cash flow position in the first place?


emily(:
5/4/2012 06:14:53 am

Cash flow is a key component in operating a successful business.poor cash flow will make portsmouth football club out of control.because they're running out of money,outgoing is more than the income and they cant solve the problems.
At first,the strain on the company’s cash flow was evident with players not been paid on time and management searching for new sources of finance.moreover,the club was looking to receive a cash injection before 17 February 2010 from an associate, but this never came.those factors caused their cash is keeping lower.

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Chantelle
5/5/2012 06:19:21 am

As Portsmouth Football club only relied heavily on TV payments to meet its monthly outgoings. The football club regularly unable to pay suppliers and their player, then without restructuring your business and finances, the outcome will normally be insolvency. Because of they dont have the cash flow forecast as first, so they will not be able to know where they have the negative cashflow going out, maybe the TV payment that the cash coming in. Pompey did the first Premier League club to enter administration with debts of around £60million and were deducted nine points, which saw them relegated from the top flight, losing the vital TV payments. That is mean they are now struggling with the cash flow problem with the TV payment! Therefore, the Portsmouth fotball club have to cut the huge wage bill by redundancy some staff in order to overcome the huge cash flow problem

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Jason Lam
5/8/2012 01:58:13 am

they are unable to pay the payment because of the poor cash flow which means the outgoing more than inflow. According to the passage they got debts around 60 million . And this explain that they spend too much in promotion.

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Marco
5/8/2012 02:56:42 am

Portsmouth Football Club is unable to pay for players which shows that the poor cash flow position of Portsmouth Football Club made the club had more outgoings than income. When this happens, it can cause the end of the football club as they don't get enough money to run the business. They heavily relied on TV payments to meet its monthly outgoing lead to the club to entered the administration wih debts of around £60million and this caused their terrible cash flow position in the first place.

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Aaron
5/8/2012 02:58:10 am

It is impossible to pay the payment for their players and the tv promotion,so the football club stop promoting on tv and may sell their palyer,then without restructuring the business and finances.If you are regularly unable to pay suppliers or employees, then without restructuring your business and finances, the outcome will normally be insolvency. In late February 2010 Pompey then became the first Premier League club to enter administration with debts of around £60million and were deducted nine points, which saw them relegated from the top flight, losing the vital TV payments.Now football club face a cash flow and financial problem,they even can't have enough money for their staff and their player.they now try to cutting cost .

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Niki
5/8/2012 05:17:58 am

Cash flow is the total cash payments(inflows) into a business minus the total cash payment(outflows).
Due to Portsmouth’s insufficient ground capacity, the club relied heavily on TV payments to meet its monthly outgoings.They have to pay suppliers or employees.They also got around £60m debts.These made Portsmouth Football Club in a poor cash flow position.

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