Birmingham have announced pre-tax losses of £20.5million and warned manager Alex McLeish of the "pitfalls" of the transfer market.
The losses are for the financial year ending August 31, 2009, compared with the midlands club making a pre-tax profit of £4.5 million for the previous 12 months. Blues experienced the big financial loss after being relegated from the Barclays Premier League at the end of the 2007-2008 campaign although they returned to the top flight at the first attempt last May under Alex McLeish.
And the club's audited financial statement blames the loss on "the decision taken by the previous members of the board to retain most of their playing staff from the previous Premier League season".
Previous owners David Sullivan and David Gold quit the club earlier this season and were replaced by Hong Kong businessman Carson Yeung.
Blues splashed out £27.1 million in wages in their successful bid to return to English football's elite. And, during the promotion season, they also saw turnover from match receipts, broadcasting and commercial revenue drop by £22million.
The statement also hints that McLeish may have more limited funds to spend on new players in the summer.
It reads: "The acquisition of players and their related payroll costs are deemed the core activity risk and, whilst assisting the manager in improving the playing squad, the board is mindful of the pitfalls that are inherent in this area of the business.
"The aim, therefore, is to manage the costs whilst being as competitive as possible with the club's financial restraints."
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