As Nottingham Forest continue to chase down a place in the top four and a spot in next season’s UEFA Champions League, this campaign has been a far cry from the struggles of last season.

Forest, currently sitting in third, level on points with second-placed Arsenal and just six points behind leaders Liverpool, have been the surprise package of this season, with Nuno Espirito Santo’s men upsetting the odds to begin the year in a title race.

Last season was a different story, of course. Finishing the season six points and one place above the bottom three, it was a campaign that saw Forest hit with a four-point deduction after they were found to be in breach of the Premier League’s profit and sustainability rules (PSR).

The aim of PSR is, essentially, to ensure financial prudence and that clubs operate within their means in a sustainable manner. Clubs are permitted to lose £105m over a rolling three-year assessment period, with allowable deductions for such things as investment into infrastructure, investment into the academy and the women’s team, and money spent on community initiatives. Losses attributable to the COVID-19 pandemic were also permitted.

READ MORE: Evangelos Marinakis outlines Nottingham Forest 'dream' as secrets to success revealed

READ MORE: New Nuno contract stance emerges as Nottingham Forest accept January transfer window 'priority'

With Forest chasing down European football this season, the prospect of another brush with a PSR breach would be a cruel one for fans. But how likely is that, and how are Forest looking when it comes to compliance?

According to figures presented by football finance expert Swiss Ramble, Forest should, just about, be able to fly under the radar when it comes to PSR and remain within the constraints.

For the 2021/22 and 2022/23 financial years, Forest made pre-tax losses of £46m and £67m, respectively. Against allowable deductions for those two periods of £4m and £15m the net PSR result for the club was a combined £92m. But with the 2021/22 period falling when Forest were in the Championship, that campaign allowed them to only make a £13m loss as opposed to the £35m per year loss allowed for in the Premier League.

That means that Forest, whose 2023/24 accounts will be published in the coming weeks, are still hamstrung when it comes to their PSR position due to the Championship season still be included in the rolling three-year assessment period.

Forecasts from Swiss Ramble, however, have Forest breaking even for the 2023/24 period, which, when adding in allowable deductions of around £10m, means that the club has a positive PSR position of £10m for the season. What that means for the club’s PSR position as a whole is that they would be just under the limit to the tune of £1m. Were Forest working with the full £105m amount, as they will be for the 2024/25 period, which will be the last PSR assessment before clubs move to a squad cost ratio rule, they would have been well under at around £23m.

With the forecast having Forest able to just about remain compliant when including the 2023/24 period, the current financial year, which runs until the end of June, is predicted to bring more headroom for the club, with Swiss Ramble predicting that the club could lose as much as £72m in the current financial year and still be compliant with the PSR regulations after the Championship year drops off the rolling period, giving the club an extra £22m of room for manoeuvre.

Moving towards a squad cost ratio rule, where limits will be placed on a club's spending on the first team and its coaching staff's wages, transfer fee amortisation, and agents fees to 70% of revenue (reported to include profit on player sales) for clubs competing in UEFA competition and 85% for those clubs not competing in UEFA competition, would be positively impacted by a successful season on the pitch for Forest this season.

Were Forest able to bag Champions League football then they would gain a major revenue boost through competing and access to Champions League broadcast rights, as well as a likely boost in commercial activity too. Increased revenue would allow for greater financial flexibility in the transfer market to help the club turn a great season from one which may have seemed like an outlier to something that happens with greater regularity.

After the PSR woes of last year, Forest appear to be turning a financial corner, and that will enable them to solidify their Premier League status and continue to push on to achieve future success.