Everything you need to know to avoid requesting something unworkable without practical results.

The total debt obsession

Before proceeding and presenting the appropriate solutions for each situation in your football club, it is essential to address one of the biggest aspirations of fans who cry out for “audits”:

WHAT IS THE TOTAL DEBT OF MY CLUB?

As shown in previous posts, the annual audit does not guarantee that all debts have been recorded.

A margin of error is inherent in the materiality principle, and some flaws in the debt-checking process since the clubs’ volume of claims is excessive. There are also potential effects of professional misjudgment by external specialists, in this case, lawyers, who can inform that a cause has a possible or a remote chance of loss, and the club ends up being executed in those values.

But how can we raise a football club’s total debt?

It is an arduous task.

A club in a recurring operational deficit forms new debts and aggravates old ones daily. It is necessary to define a cut-off date and determine the extent of retroactive years researched to do detailed work with little to do with the audit they are petitioning.

The club can choose between consulting work with a debt audit approach and extensive research or internal labor in a dedicated project.

For example, supposing that a consulting firm will carry out this total debt survey with a base date of 12/31, covering the number of years sufficient to cover all possible and imaginable statutory terms.

All contracts, labor relations, services provided, suppliers, and the like would have to be thoroughly analyzed during this period. Considering the recovery programs’ effects, all taxes were recalculated, revalidating all payments with the collection forms. Any litigation would need to be discussed and updated monetarily.

Thousands of estimates need to be made. Hidden liabilities must be mapped: contingencies, non-conformities, defaults not yet collected, etc.

The procedures adopted in auditing the financial statements, bank confirmations of loans, and part of the omitted liabilities procedures would be used. Poor performance compared to a club’s total debt survey volume.

It is a work of about six months and will be entirely out of date when delivered. As much as you update the amounts, there are n subsequent events significantly change the survey and create contingencies and daily debts.

Then you would pay about BRL 500-600 thousand in fees (a modest budget estimation) to get an outdated picture of how much you owe.

It is a debt you know you cannot pay, incompatible with your income cash flow. That makes the club completely unattractive for any operation to rescue, restructure, or sell football operations.

It would be a whim and yet another tug of war on social networks.

Can it be done? It can.

Is it an audit, as the fans requested? No!

Is it a product that will be delivered by the annual audit already hired by management? Of course not.

Serious management should do this survey promptly. After all, without this debt data, its projected cash flows are nothing more than mental masturbation.

The tasks required are not complicated. There is no need to use specialists at the end of the day; whoever is hired to do so will use the club’s internal staff and lawyers to obtain, analyze, and compile the information. There is nothing to prevent management from carrying out this type of survey and submitting it for validation by consultants or auditors in pre-agreed procedures.

Once again, these procedures do not constitute an audit that will generate an opinion but support work to provide a management tool.

Debt control and contingency formation must be continuous. Management needs to have its debts adequately classified and recorded, have disbursement forecasts, and, above all, manage the hidden and ongoing liabilities.

In practice, the vast majority of current club management in Brazil is lost. They are informed weekly of dozens of labor-related cases about a couple of civil nature claims and often encounter tax and social security problems. There is no money to pay debts, no resources to try to make to total debt survey, and they are at the mercy of luck.

Now is the time to explain how to get out of this impasse.

And it won’t be like an audit!