Aston Villa chairman Tony Xia has warned the club will have to curb its spending next season because of the pressures of Financial Fair Play.
The club has posted losses in every season its billionaire Chinese chairman has owned it.
Whereas that used to be fine, now clubs have limits on how large a loss they can post over a three year period.
As a result, Villa are going to have to cut their cloth accordingly for next season - or face an enormous fine, or worse.
So what’s FFP all about then? Read on and we’ll try and explain.
Why have rules on spending anyway?
The reasons for FFP are, theoretically at least, twofold: to keep the game and clubs financially healthy, and to maintain a competitive balance.
During the credit boom years, many owners took over clubs and borrowed heavily using them as collateral.
They pocketed the matchday and TV revenue and let debts mount.
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These debts would be left behind when they bailed out - and many clubs were later docked points after going into administration.
FFP rules are to prevent clubs running up too big an annual deficit and slipping into a black hole.
The rules are also to prevent “financial doping” where rich owners can pump in vast sums in fees and wages totally unrelated to real income to gain an edge on their rivals - although it seems the horse may already have bolted on that one in the Premier League.
How can one set of rules cover mega-clubs and minnows?
Well, they don't.
From the Champions League to League Two, every set up now has their own specific regulations tailored to their member clubs’ financial landscape.
Clubs playing in UEFA competitions can make losses of up to €45m over a three-year cycle if they have a rich owner picking up the bill and just €5m if shareholders are not able to inject equity, converting debt to shares - that is effectively buying more shares in their own club at a price that covers the loss.
In the Premier League, clubs can lose up to £115m over a three year cycle (or £15m if not covered by an injection of equity).
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There are also limits on wage bills with the annual increase over £52m pegged to £4m a year.
The lower divisions of the Football League have their own FFP system with wages spending linked to overall revenue.
In League One the wage bill is limited to just 60 per cent of the club’s turnover and in League Two it is 55 per cent.
What system does the Championship use then?
This season (2016/17), new ‘Profitability and Sustainability’ rules operate in the Championship.
Championship clubs voted to change their FPP rules in November 2014 as part of wide-ranging negotiations with the top-flight about future solidarity arrangements that has contractually linked the finances of The Football League and Premier League for the first time since the formation of the latter in 1992.
So, for the first time, clubs will be assessed over 3 seasons (rather than just a single season).
This change brings the Championship clubs into alignment with the Premier League – both have ‘Profit and Sustainability’ rules that are now fully aligned.
The maximum loss limit is now £13m per Championship season
Losses are assessed over three seasons (rather than just over the single, previous season).
The assessment of each club’s finances is a combination of a historic assessment (looking at figures for the two previous completed season) and an assessment over the season currently taking place.
Clubs are permitted to exclude some expenditure (Youth development spend, Charitable Community spend, and Women’s Football spend). For a Championship cub this rarely exceeds £500k per season (and is usually less).
Clubs relegated from the Premier League are allowed to make losses of up to £35m in respect of any season spent in the top flight – this should allow clubs to better manage the transition.
What happens if clubs bust their ceiling for losses?
Any punishment for breach of the rules will be determined by an independent panel (the ‘Fair Play Panel’).
But what are the potential punishments?
Previously the Football League has only been able to either fine promoted clubs (a fine the Premier League didn’t help them collect), or impose a transfer embargo for historic overspending (which always like a stable-door/horse scenario).
With this change, a wide range of punishments are now available.
Nothing is off the table; the Football League are now able to impose a points deduction during the current season, or demote a club from an automatic promotion position into the play-offs (or out of the play-offs altogether).
Transfer embargoes are also available (with the earliest one potentially applying during the Summer 2017 Transfer window.
What does that mean for Villa?
As we spelled out here, while Villa have made more than £150 million worth of losses over a three-year period, not all of it counts towards FFP.
However a football finance expert says Aston Villa’s predicament is ‘really severe’ and has predicted sales this summer.
Villa are thought to have to raise as much as £45 million in order to stay on the right side of the line.
Kieran Maguire, a lecturer in football finance at the University of Liverpool, discussed Villa’s problems at length with the BBC.
He said: “It’s really severe for Villa because this is the second year they’ve had parachute payments. They got around £35million from the Premier League to cushion the blow of relegation.
“Those payments get cut back severely next year so they’re going to have £20million less coming in. I think the problem for Villa is that the owner has gambled in the last couple of years on recruiting players on big wages.
How can they raise that kind of money?
Wages are a huge cost for Villa - in the area of £65 million a season - so while cutting the likes of John Terry off the wage bill will help, they will need more. Loan players like Robert Snodgrass and Lewis Grabban, who have had a great impact on the club, will possibly be out of reach with this financial backdrop.
The fear for Villa fans will be Jack Grealish. The talented midfielder would raise something like half the money they would need - but would be a major blow.
What has Tony Xia said?
As part of a longer statement, Dr Tony said:
We have been heavily investing for the past two seasons.
However, the loss on Saturday means that we need to change a lot of things.
No one wanted to see the club have to go through this, but I believe that only changes can help the club to progress towards the positive direction and this requires the joint efforts of everyone associated with this great football club.
"No matter what the changes will be, I sincerely hope that everyone can unite and overcome the challenges together.
What are the main costs for a club?
The biggest single cost is player wages.
Wages count towards the FFP losses figure although promotion bonuses are exempt so getting a player to agree such a deal may be useful in recording terms.
Many clubs that loan players out ask for a large proportion of their wages to be paid and bringing in an in-demand starlet from a big club carries a cost, especially if other clubs are also interested and their is some haggling.
Clubs may ask for a loan fee too and those costs are counted in FFP too.
Transfer fees are also counted, although they are broken down and spread - “amortised” - over the life of a contract and so can be structured shrewdly to minimise their FFP impact.
For example, a player who cost £50m on a five year contract needs to be amortised at the rate of £10m a year.
At the end of a player's contract, their 'book value' will therefore be zero.
The amount amortised each year needs to be counted as a 'cost' in the club's FFP calculations.