Rugby Receivables Finance

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With the Rugby World Cup 2021 round the corner, it is time that rugby teams’ financial managers and owners get themselves familiarized with the concept of what receivables are and how this financing facility can help them during a period of financial uncertainty or growth.

What are Receivables?

Receivables are more commonly known as “account receivables” and in the sports industry “sports receivables” at times. It is the financial amount owed by a customer to a company against providing services, products, or entertainment.

The company provides services to the consumer on credit, and the customer has the ability to pay later, when the invoice or contractual payment becomes due. So fundamentally, these are pending invoices that the customers needs to pay on the due date.

Many companies these days operate on the model of account receivables, for example, your credit card. You use the money by the bank that you do not have, and then you pay it back within the next 30 to 60 days when the invoice becomes due.

A similar phenomenon works in the sports industry, such as broadcasting a rugby match. Although the TV channel broadcast a rugby match live, the payment for that broadcast may not be due until the end of the season.

So from the rugby team’s perspective, the money owed by the TV channel or a broadcasting company is actually “sports or rugby receivables.” It does not appear as the money owed but an asset on the rugby team’s balance sheet.

Why Do Rugby Receivables Matter?

Rugby receivables are a significant factor in a rugby team’s working capital. If it goes too high and the team is slow in collecting what different parties owe to them, the team is highly likely to find themselves in financial turmoil sooner rather than later. It may result in a rugby team or club having financial difficulties and issues with paying their short-term obligations, such as utility bills, day-to-day operational expenses, and other cash payments.

If the outstanding receivables balance is too low, the team may be unwisely damaging their fan base and popularity, resulting in not enough services acquired by the fans, sponsors, and other business partners. For example, a rugby team’s low performance may drive the fans away and thus decrease annual sales.

If a team drops or exits from the main league, they may end up losing prize money and broadcasting revenue from different channels and also losing sponsors’ funding. So, in general, rugby receivables reflects the selling potential of the team as well.

A rugby team or clubs can sometimes use their rugby receivables as security or collateral for borrowing from the banks or lending institutions. The level of accounts receivables of a rugby team can also affect certain vital financial performance aspects and measures, such as days payable, working capital, the current ratio, etc.

However, it is essential to note that any uncollectable receivables is not an asset. Uncollectible receivables or ‘overdue’ may fall into the category of doubtful accounts (depending on the jurisdiction of country incorporation), reducing the account receivables of the rugby team.

Hence, these are the reasons why companies and lenders only allow creditworthy customers to avail of their services, to guarantee the payback of their loaned amount, services, and corresponding products.

Sometimes lending companies or service providers sell their invoices to other collection companies for cents on a dollar. It is then the collection company’s job to recover their receivables if they can.

Other Receivables

Other rugby receivables can be prize monies from the competition, broadcasting contracts or sponsor contracts.

Speak to our trade finance team