17th June 2019 All Posts

Managing the Funding Shortfall

In a recent About Early Years bulletin, ‘Counting the Cost in Spring 2019’, Ceeda have reported some worrying statistics. The gap between the average funding rate and the cost of delivery is now 37% for 2 year olds and 20% for 3 year olds, leaving a huge funding deficit of an estimated £662 Million.

Head over to Ceeda to download the full bulletin today.

So how are childcare providers managing this gap?

Ceeda report that a variety of cost cutting measures are being employed. Of the settings included in the sample

  • 50% have reduced staff training
  • 43% have cut back on learning resources for their children
  • 41% have lowered their ratios
  • 20% have lowered the qualification mix of their staff
  • 19% have increased part time contracts with earnings below the employer NI contribution threshold
  • 19% have reduced the range or quality of the food offered
  • 16% have increased the use of casual employment contracts
  • 13% have recruited younger staff under the National Living Wage threshold.

These are worrying figures which are only expected to increase unless the funding formula changes.

Connect Childcare have helped thousands of Nurseries across the UK to understand their finances with comprehensive business reports and the use of our flexible billing engine to set up different chargeable options to ensure their ongoing sustainability.

Having researched our own customer base we have highlighted the 5 most popular solutions to manage the early years funding gap. We will share them with you here.

Please note. There is no ‘one size fits all’ solution to managing funding in a childcare setting. You should understand all of the options available to you and ensure that they are compliant with your Local Authority rules before implementing any changes.

Charging for Meals & Snacks

Providing high quality food options for children can be quite an expense for a childcare setting. It is now widely accepted that parents need to pay for meals and snacks as an additional charge on top of their childcare sessions.

Take a look at this help article for information and help on setting up meals and snack charges in the Connect Childcare system.

Charging for Consumables

A consumable charge may be a little harder to explain to parents, but many settings use a consumables charge successfully to cover their overheads.

The government’s operational guidance states; “Government funding is intended to deliver 15 or 30 hours a week of free, high quality, flexible childcare. It is not intended to cover the costs of meals, other consumables, additional hours or additional activities.”

You should send a letter to inform parents of all of the things that your consumables charge covers and include it in your contract with them. (You may want to state that the list is not exhaustive). Consumables charges can cover lots of different items including; learning resources, art supplies, wet weather gear, children’s learning journeys, cover staff etc.

Take a look at this help article for information and help on setting up flexible consumable charges in the Connect Childcare system.

Charging for Extras

Charging for extras is also a viable option. Like consumables, ‘extras’ can cover a range of different things like trips and outings, non standard sessions like forest school, music, yoga etc, or even admin charges, high qualification mixes and higher ratios.

You can set up each of the charges above and apply them to different relevant sessions, but many settings chose to set up one catch all charge called ‘Additional Services’, ‘Full Services Bundle’ or ‘Daily Extras’ that they add to parents bills either daily, weekly or monthly.

For help on setting this up within the Connect Childcare software, take a look at this help article.

Charging for Premium Sessions

A number of settings we work with restrict funding to certain hours each day. For example, funding is applied on sessions between 9am and 5pm and the additional wrap around sessions each day are charged at a premium rate.

Charging for Premium Wrap Around Sessions / Limiting funding to certain hours.

Connect’s system allows flexible sessions, billing and funding allocation. For more information on how to change your prices to set up premium sessions take a look at this webinar.


Different Local Authorities have different viewpoints on acceptable charges. You should always make sure your LA is happy with your proposed fee structure and your parents have signed to accept the charges before implementing them.

Lots of helpful guidance can be found online. Here are two links that we recommend you look at for guidance and advice:

Early years entitlements: operational guidance

Facebook groups like Champagne Nurseries on Lemonade Funding are also a fantastic source of information with lots of real life examples.

For help with setting up your funding and fee structures call our support team on 01282 507 945

Share this article
About the Author

Connect Childcare have been developing purpose built nursery management software for the past 15 years. Their missions is: To develop management software that improves the lives of children, globally.