top of page

Managing your FEE funding (Part 2)

In our article last week we looked at the challenges of managing the FEE funding you receive each term and the importance of how it fits into your forecasting and cash flow management.

This week we will look a little more deeply into this area to highlight some of the more tricky areas that have been raised as concerns with us recently.

The bigger picture – Forecasting places

Free entitlement funding forms part of your overall income, (your sales of childcare places in effect), so in your financial forecast for the year ahead you will plan on getting FEE funding for a number of 2,3 & 4 year olds and possibly 30 hours places too. Alongside this in your forecast will be any places that are wraparound or private places taken by parents who want more childcare than is provided on the FEE offers or perhaps don’t qualify for 2 year old free places or 30 hours places.

From past year’s figures you will have a strong idea how many FEE places you will deliver over the year, (although the past 2 years figures will be somewhat distorted by the Covid pandemic). You should also either have a waiting list or an understanding of demand for FEE places from parental enquiries and your marketing feedback. All these information sources will help you put together a reasonably accurate forecast for the number of places and FEE hours you are likely to deliver each term.

A financial forecast for the year is important to firstly estimate incomes and expenditures and make sure you are planning to make profits / surpluses, but also to know where your income is likely to come from, which in turn will identify areas where you may need to do more marketing to increase take up, and FEE places are a key part of those areas.

This estimation and forecast of likely FEE places you expect parents to access, provides you with your estimate of what the budget share is likely to be each term and it is important to check your estimations with your actual FEE budget share when you receive it.

Remember - Free entitlement funding is not guaranteed income until you fill the places that your budget share amount is based on!

What might affect your forecasted income and FEE places?

The process of forecasting is just a collation of the market information you already have, what’s been the normal trend in the past and information form your most recent marketing and enquiries from parents. When you look at this holistically then you can make a considered forecast based on your best assessment of what might happen.

Here are some typical factors that may affect your forecasts and actual take up of places.

1. You are not doing any forecasting or engaging with future parents and therefore are not really sure what might happen in terms of take up of FEE places or budget share numbers and, therefore, are not clear if you need to do more marketing to increase place take up.

2. Factors over the recent past that may have changed demand either positively or negatively. There will certainly be changes to the childcare market this year that are ongoing effects of the pandemic such as the changes to family lifestyle, jobs and working arrangements.

Equally you may have changed your delivery model recently, perhaps you now offer more convenient hours or extended days for parents and that may encourage more 30 hours take up, or maybe you have expanded a little and can take more places now or changed age ranges you now care for.

Typical changes like these may affect take up forecasted income and budget share, so it’s important to keep under review all the recent changes to keep your forecasts as accurate and meaningful as possible.

3. New childcare providers in your area may have resulted in a reduced demand for your places thus impacting delivery of FEE places and budget share allocations.

Receiving your budget share – “Decisions and Actions”

So having forecasted your anticipated FEE income and eventually receive your budget share there are a few decisions and actions you are likely to take.

1. Compare your budget share amount with your forecasted amount of FEE children and funding expected; are they the same or very similar?

2. If it is a similar amount then you can be confident that the funding you have received is about right and not likely to be clawed back later.

3. If the budget share you receive is more than the actual children attending because a few have dropped out, gone elsewhere or parental circumstances have changed, then ring-fence theoverpayment element to be saved to pay a future claw-back or a reduced budget share amount in subsequent funding period, whichever is applied. This is not your actual income at this point.

4. If you have been given less budget share as more children have taken places unexpectedly, then you will claim the additional places in adjustment weeks.

5. Enter the receipt of your budget share into your cash flow forecast, but remember that only the sum that equates to the amount of children / places you have actually filled can be used, the overpayment amount will be taken from your cash flow forecast either as a claw-back or will remain in your cash flow forecast to form part of a subsequent reduced budget share payment designed to balance out the initial overpayment.

In Summary

Here’s a quick recap of a few options for managing and controlling and your budget share and integrating it into your overall financial systems…

  • Be sure to forecast and update forecasts regularly taking account of market of delivery model changes there may have been.

  • Create a strong and regular cash flow forecast to be in control of ‘money in’ and ‘money out’ of your setting and to make sure you don’t run out of cash.

  • Any overpayments of budget share should be ring-fenced to ensure...

    • You have money to pay it back when the time comes

    • You can clearly see what money is left in the business that is free to use which will enable you to plan your spending and to manage only on what is true income.

Information & Support available

If you need more information or support on any of the following please do contact us:

  • 1:1 sessions on managing budget share as part of your financial systems

  • Generating forecasts to inform likely surpluses for the year

  • Creating cash flow forecasts to keep track of your income and spending

For any other childcare business related queries please go to the website for more information and resources or contact us directly.

We will put all future articles in Best Start and put a link to our website at the end of each article so you can access our information at any time.

If you would like support at any point, please do contact us on


Featured Posts
Search by
bottom of page