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How to make government nursery funding work for you 

Expert funding advice for nursery managers
8 min of reading
05 April 2024
Childcare funding in 2023 - article cover

Since the changes to government nursery funding in England were announced, information has slowly dripped through the local authorities to nursery managers and owners.  

Now, with around 150 local authorities, it is unlikely that two nursery owners have had the same quality of information about the extended funding.  

We sat down with Tricia Wellings, Director at MBK and early years expert, to discuss how to make the government nursery funding work for you. 

Tricia Wellings headshot, founder of MBK
In this article:

    Is government nursery funding a good thing?

    As long as you are prepared to use the nursery funding to your benefit, why wouldn’t you offer some funded places?

    Government nursery funding is optional for early years settings, so offering funded places is entirely your choice. But, as Tricia Wellings says, “As long as you are prepared to use the nursery funding to your benefit, why wouldn’t you offer some funded places?”

    Tricia Wellings is the Director of MBK Early Years Consultancy, and with over 25 years of successful nursery ownership, there’s not much she doesn’t know about childcare funding.

    Tricia has been busy lately, sharing her advice and guidance for this article and featuring on our Blossom podcast to demystify nursery funding (looking at the April 2024 changes and beyond). 

    Of course, with any new government initiative, there are risks involved. Signing up to offer funded childcare places should be weighed up in your business model. This is the only way to ensure the higher rates of funding sustainably help your nursery to thrive.

    Free money — where’s the catch? Although it’s not too good to be true, care is needed to ensure you use the extended free childcare offer to your advantage. Without realising, you may lose money if you aren’t aware of the ins and outs of nursery funding fundamentals.

    What are the risks of offering free childcare places?

    If your nursery is struggling with low or sporadic occupancy, having guaranteed funding throughout the year can offer your setting reliable income (38 weeks is the new ‘year’ in the case of funding, lining up with school term lengths). However, risks are involved even with the option to stretch funding across the full 52 weeks.

    To accommodate the new funding offer, your nursery must operate differently. If you do as you always have, your business will have little to no growth

    The current English government has introduced an extended free childcare offer. With a general election nearing, what is the risk this could all be halted? With any possible change of political party, initiatives are always at risk of altering.

    However, if we draw on historical patterns, large funding and educational initiatives like this will likely remain the same even if a new party comes into power.

    The main risk with offering funded childcare places is associated with your business model. There should be caution taken to ensure your model covers you sustainably. When we say sustainably, we mean futureproofing how your childcare packages will help your nursery stay profitable even if the cost of running your nursery increases.

    For example, the new nursery rates are higher for all age groups but more so for children aged two and under. If the national minimum wage were to rise in the coming years, your setting must be able to absorb additional staffing costs while remaining profitable.

    How to make government nursery funding work for you

    “If you keep doing the same thing, you will get the same outcome,” Tricia reminds us. If your nursery goal for 2024 is to increase occupancy and profitability, you won’t reach this goal by repeating old ways of running. You must change your strategic thinking.

    Think strategically

    When thinking strategically with government funding, it comes down to knowing what others are doing and even knowing what can be done.

    Sometimes, it can be easy to forget that your nursery is a business designed to make a profit while offering parents a high-quality childcare service. To change your thinking, you sometimes need to invest in expert advice.

    You only know what you know. Sometimes, the question is, if your childcare business needs to improve, can you afford not to invest in changing your approach?

    Balance the funded vs private places

    A small set of balancing scales on a wooden surface, implying balance

    Tricia encourages offering a balance of funded and non-funded places. Her nurseries currently offer around 25% of funded places. With her business model in place, she predicts this may increase to around 50% of her places being government-funded.

    She’s confident that the funding will work favourably for her eight settings, helping her nurseries grow whilst giving parents access to high-quality childcare services.

    Know the legislative change with voluntary charges

    The legislation around all additional charges must be voluntary has changed. It now explains that there must be alternative options for parents to avoid paying additional charges.

    This means parents can still access the free childcare hours without additional charges, but you can make this work for your timetable and occupancy planning.

    In short, if the funding is stretched to 52 weeks, this equates to around 11 hours per week. Unless the funding offered is at a higher rate than your own fees, a full 10-hour day without additional consumable charges may cause you to lose money.

    The alternative option may be to offer two afternoons rather than a full day. The available afternoon slots can fit in with your occupancy planning to make it work for you.

    Know your local authority rates

    There are around 150 local authorities in England, each can use a slightly different funding formula. The first step for making government nursery funding work for you is to know the rates and additional funding available from your local authority.

    For example, some local authorities give a small additional amount for a setting employing a qualified teacher. It is also helpful to stay aware of the support and guidance offered around using the funding effectively. Your local authority may have webinars, run discussion groups, or offer further support online.

    Screenshot of the government's tool for finding your school's local authority

    You can use a service from the government to find your local education authority based on your setting’s location. Note that if you have more than one setting, you may have more than one local education authority to work with.

    Organise childcare packages to increase income

    Creating childcare packages that include chargeable consumables and differ depending on a number of days fall under the business model umbrella.

    You have to make your business model work for you. This is how you will make the best income you can with the funding changes.

    Creating childcare packages for children who attend your session for 1-5 days per week can help with your financial forecasting. To know how much income you will receive, including the additional consumables charges.

    Let’s look at some examples. By stretching the funding across 51 weeks, parents will have access to around 11 hours per week under the new 2-year-old working parents funding offer. If they decide to use this for one day in nursery, you may create a package that includes consumables (like meals, additional activities, nappies and wipes, etc.) to use the 10 hours and leave the 1 hour unused.

    Or, if a parent has their child booked in for two full days of nursery a week and meets the eligibility criteria for working parent childcare funding, they may have a package that includes the 11 hours funded, and they pay for the remaining hours, including consumables.

    Have full visibility of your nursery

    You should easily know how many children you have on a given day or if there are any spaces for parents to book last-minute extra sessions while staying within the ratio.

    Having seven babies in will still cost the same as staffing a full nine - your nursery software should highlight the gap in profitability.

    Your nursery software should provide day-to-day visibility of the number of staff, children attending, and any children with Special Educational Needs or Disabilities (SEND). This information should be incorporated into the bigger financial forecasting picture of outstanding invoices, expected income, and spotting trends across your nursery.

    How can Blossom help with funding?

    As one of the UK’s leading nursery software management applications, Blossom is designed to support nursery managers with funding changes from April 2024 and beyond.

    Our easy-to-use nursery software helps you track the financial picture of your nursery whilst running an effective childcare company. We also have a fabulous funding calculator to help you run a quick forecast on funding – give it a try!

    Contact one of our customer support team today for your free no-strings demo.

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