The Cash Flow Challenge No One is Talking About in Athletics NewCos

As universities continue evaluating athletics foundations, LLCs, and other NewCo structures, most conversations have centered on governance, legal structure, tax considerations, and revenue sharing. Those are all important discussions.

Another issue is beginning to emerge, and it has the potential to create operational challenges for both athletics and the institution if it isn’t addressed early.

Cash flow.

Everyone is talking about where the money comes from and where it goes. Few are talking about whether it will be there when it’s needed.

For many athletics departments, cash flow has never been something they needed to actively manage. Budgets and spending within approved limits mattered. The university’s treasury function handled the movement of cash behind the scenes.

A separate entity changes that dynamic. Athletics leaders may soon find themselves responsible for ensuring cash is available to meet obligations as they come due while also coordinating financial activity with a university that continues to provide many of the services supporting athletics. That shift may sound subtle, but it creates a series of operational questions that many institutions have not yet considered.

Reality #1: A balanced budget doesn’t guarantee cash in the bank

One of the biggest mindset shifts is recognizing that a balanced budget and healthy cash flow are not the same thing. An athletics NewCo could finish the year exactly on budget and still experience periods where cash balances become uncomfortably low. That’s because revenues and expenses rarely occur on the same schedule.

The timing mismatch between revenues and expenses has always existed. Conference distributions arrive only a few times each year. Ticket revenue fluctuates based on seasonality. Sponsorship payments follow negotiated payment terms. At the same time, the various expenses of operating an intercollegiate athletics program continue on their own schedules.

Historically, those timing differences rarely attracted much attention because athletics operated within the university’s broader financial ecosystem. Athletics represented a relatively small portion of the institution’s overall cash position, allowing the university to absorb normal fluctuations in the timing of cash flows.

A NewCo changes that equation. Now, the athletics entity has its own bank account, its own cash balance, and its own responsibility for ensuring enough cash is available to meet obligations as they come due. The fact that annual revenues exceed annual expenses no longer guarantees there will be enough cash available on any given day.

The unfamiliar question, “Will there be enough cash in the account to make next month’s payments?” represents an entirely new way of thinking about financial management because it hasn’t been a question athletics leaders have historically had to ask.

Reality #2: The university may still be carrying the cash burden

Even when athletics revenue moves into a NewCo, many operational costs may remain within the university, including payroll, game operations, team travel, vendor payments, debt service, and athlete revenue share. In many operating models, the university continues paying for these expenses before receiving a transfer of revenue generated by NewCo. Once athletics revenue begins flowing elsewhere, there’s less cash available in the overall university financial ecosystem to cover expenses.

On paper, everyone gets paid when all is said and done. From a cash flow perspective, however, the university may be financing those operations until reimbursement is received. That financing period may last a few weeks, months, or much longer depending on the cash availability of NewCo at any given time.

Reality #3: Revenue streams leave campus before expenses do

While many of the revenue streams traditionally supporting athletics operations may now flow directly into a NewCo, the university may continue paying for shared services, facilities usage, administrative support, and other operating costs during the transition or even permanently under the chosen operating model.

The result is a different pattern of cash movement. Not only does cash flow modeling need to reflect the athletics operating budget that remains within the university, it also needs to reflect the shared services and other expenses the university is carrying on behalf of NewCo until reimbursement is received. The timing gap created when the university floats shared services depends on billing cycles and collection practices of the university and payment priorities and cash flow constraints of NewCo.

Small business processes suddenly have much bigger consequences.

Cash flow is shaped by hundreds of routine administrative decisions:

• How quickly are invoices generated?
• How long does it take to collect receivables?
• When are recurring vendor payments scheduled?
• How frequently will the university bill NewCo for shared services?
• How much cash should remain in the account before discretionary spending is approved?

These may seem like routine back-office activities. In a NewCo environment, they directly influence liquidity. An invoice that sits for three weeks before being sent delays cash coming into the organization. Having rent, payroll, and credit card payments all due in the same week can create unnecessary cash pressure even when monthly revenues are more than sufficient.

Many of these processes have always existed. They simply haven’t carried the same level of financial significance until now.

Where the friction is likely to appear

The transition to a new athletics entity is not simply about creating a separate legal entity. It requires two organizations to rethink how money moves between them. Some of the most important questions are operational rather than accounting-related:

• Who owns cash forecasting for the complete athletics ecosystem?
• Who determines when cash transfers to the university occur?
• Who determines the priority for surplus cash when revenues exceed projections?

The first questions are primarily implementation challenges and are temporary in nature. They require leadership to establish clear roles, define expectations, develop policies, create forecasting tools, and determine the cadence for monitoring cash needs. There will likely be some trial and error as institutions learn how much working capital the NewCo should retain, when reimbursements should occur, and which levers can be pulled if cash collections fall behind expectations. Once those processes are established, the day-to-day friction should lessen.

The third question is different. It is less about process and more about governance. Suppose football ticket sales exceed projections. Does that additional cash stay in the NewCo to hire another ticket sales representative, invest in premium seating initiatives, or expand revenue-generating capabilities? Or should some or all of those funds be transferred to the university to support athletics operating expenses, such as a facelift to the football locker room, improvements to Olympic sports team travel, or shared administrative functions? Historically those decisions were often made within the athletics business office as part of a unified budgeting process, and the tradeoffs were relatively straightforward. Now you’ll have multiple stakeholders who believe it should be spent differently and the same incremental dollar has competing claims before it’s ever spent.

A NewCo introduces new stakeholders, different financial objectives, and potentially competing priorities for the same dollars. Leadership may agree that growing future revenue is important while also recognizing the importance of supporting its sports operations. Those conversations are unlikely to be resolved through accounting policies alone. They require clear governance, defined decision-making authority, and alignment on priorities.

Recommendations for institutions preparing for the transition

Athletics business officers do not need to become treasury experts overnight. They do need to recognize that cash management deserves a place in early planning conversations. Several practices can help.

Treat cash flow as a management discipline. Annual budgets remain important, but they should be complemented by regular cash flow forecasting that looks at when money is expected to come in and when obligations must be paid.

Define how funds move between the university and the NewCo. Billing cycles, payment timing, and approval responsibilities should be established before operations begin rather than after questions arise.

Strengthen billing and collection practices. Timely invoicing and active follow-up become increasingly important when cash resides in a separate legal entity. Delays that once had little operational impact may not affect liquidity.

Coordinate payment timing thoughtfully. Understanding when major obligations occur alongside expected revenue collections can reduce unnecessary cash pressure without changing the underlying budget.

Assign ownership for liquidity. Someone should be responsible for monitoring cash balances, maintaining forecasts, and facilitating communication between the university and the NewCo when conditions change.

The conversation is just beginning

Athletics NewCos are introducing business processes that have long been common in the corporate world but are relatively foreign within higher education. Cash flow management is one of them. The institutions that navigate this transition most successfully will likely recognize early that creating a separate legal entity also means creating new financial operating disciplines.

The real challenge goes beyond creating a NewCo. It’s creating the financial operating model that allows both the NewCo and the university to succeed together. As new entities take shape across college athletics, James Moore’s Collegiate Athletics CPAs and consultants work alongside universities to build and sustain effective financial operations.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.