How the Cowboys are exploiting "cash over cap" to maximize spending limits

"Cash over Cap" is a relatively new term in the Dallas Cowboys community. While the name is a bit obscure, it has fast become the new norm of contract negotiations.

So what is Cash over Cap?

The easiest way to explain this would be to compare it to a credit card. You are paying for something with the expectation that you will progressively pay it back, in full, at a later date. A person may use credit because they may not have the cash on hand to pay for the item or service at that moment.

The credit card is the salary cap while cash is - well cash.

NFL teams are now giving bags of money upfront in contract negotiations, which satisfies the player right away and allows the team to spread the cap hit throughout the life of the contract. Still confused?

Let's say someone signs a five-year extension and gets a $25 million dollar bonus upfront. The player walks away with a $25 million deposit (depending on the negotiated date), while the team can account for the player at a much lower cap hit to begin the contract.

The Cowboys are benefitting from the "cash over cap" spending method.

Lowering the players' base salary that year comes with future consequences. Plainly, the team now has to account for $5 million each year for the next five seasons to account for the money they just gave to the player. Think of it as a yearly payment to a credit card.

The payment does not include money but is actually accounting for what you owe to the cap.

The structure can be altered to allow teams to maneuver money depending on the year. That is what the Cowboys are doing when they restructure a contract. They are giving the player cash upfront in order to create cap space for that season. Kicking the can down the road.

While the player gets the money he was already due to earn early, the value of a cap dollar diminishes over the life of the deal. Cap Friendly.

For the team, the tactic comes at the expense of future cap space. Remember, it all must be accounted for at some point.

So why would a team do this?

It is a calculated risk teams make in order to add a talent they otherwise cannot afford. In other words, the team has mortgaged future cap space in order to provide instant cash to a player that can help them win "now."

While there are many other factors involved when signing players, we have all come to realize that Dallas loves their cap flexibility. One thing they may look at to determine risk is to compare cap percentages today versus how they may look in the future.

For instance, take a look at Dallas Cowboys safety Malik Hooker's new contract. He recently signed a three-year contract extension worth $21 million with $11 million fully guaranteed. Hooker was entering the final year of his contract.

At some point, that guaranteed money has to be paid out "AND" accounted against their salary cap.

According to Over the Cap, the contract pays Hooker $9.75 million cash in 2023. The Cowboys' salary cap charge for him this season is roughly $4.5 million but drops to $4 million next season. If you have been paying attention, that number will rise in the last two years of that deal to account for the upfront cash given to the player.

So why was giving cash upfront better for the team?

While we are often enamored by the numbers of a deal when they are originally announced, a simple percentage behind the scenes could indicate the risk associated with a particular deal.

Hooker accounts for 2% of the overall cap this season. Like his cap hit, that number drops to 1.6% of the team's cap next season. This, of course, includes forecasting what the future salary cap will look like.

In the third year of the deal, Hooker's cap hit almost doubles from the previous year as it reaches $7.75 million. Interestingly, his cap percentage only rises to 2.7% of the team's cap that season. That means teams are anticipating the rising salary cap while calculating percentages to figure out if that risk is feasible to digest in future years.

Hooker got his money now, while the team never accounts for more than 3% of the team's cap for him.

That means the Cowboys will retain Hooker at a price he was willing to play for, while the risk for the team never costs them more than 1% of future cap space over the next four seasons.

What options do both sides have if there is a dispute?

From outplaying their contract to having little to no guaranteed money remaining on their current deals, players like Zack Martin have very little leverage. Holding out has always been a popular choice but it now comes with an irrevocable daily fine of $50K for each day missed.

Rumors of faking an injury have started to swirl but I would imagine this tactical loophole will be addressed shortly by the NFL. Weaponizing a player's health is something I hope doesn't become an issue.

For the team, eating salary cap space and cutting a player loose is usually a last resort. With so many resources poured into developing and maintaining players, releasing someone is a tough decision. The intangible value and relationships developed cannot be discounted either. If a team cuts a player that has guaranteed money remaining on their deal, this creates what is known as "dead money."

The Cowboys are carrying roughly $14.6 million of dead money, most notably to former tackle La'el Collins ($8.1 Million) and running back Ezekiel Elliott ($5.8 Million). You do the math.

Although they rank in the bottom half of the league already in this category, removing those two contracts would not only give the team more money to spend against the cap, it would rank them 31st with only the Cincinnati Bengals accounting for less money to players no longer around.

Buyer beware for whenever a popular name becomes available in the free agent market.

As the Cowboys continue to negotiate deals with their own players, take a look at how much space a players deal accounts for now and in the future. It could provide details on how much risk they are assuming with each player.

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