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Managing your Free Early Education Funding (FEE)

As we all get to grips with the challenges and our aspirations for the New Year it’s often helpful to reflect on last years obstacles and revisit our approach to them to make improvements to our businesses.

One such challenge that has been mentioned many times to us during our work on the Covid recovery grant reviews and business support, was the difficulties of managing the 2, 3 & 4 year old FEE funding you receive.

There are a few key areas where providers have expressed challenges but essentially they tend to be bound up with the process of receiving an estimated budget share of place take up and being funded to that estimate, when in reality you either end up with less or more children. As you know this is dealt with by mid term adjustments to balance the funding to your actual for the term.

That is all very logical and works well, but unless you manage the funding when you receive it to prepare for possible claw backs or reduced funding in subsequent terms, the funding payment itself can create a false sense of security. There can be an urge to spend some of the funding on equipment or even to cover some debts if things are tight, which can essentially mess with your cash flows. For these reasons the FEE funding needs to be controlled and considered within the context of your overall cash flow rather than just a cash injection to use freely.

When is FEE funding yours to use?

The funding you receive for free entitlement offers only becomes a “sale”, and therefore your income, when you have the number of children and hours that the funding was based on and equates to.

For example:

Let’s say that the estimate of FEE funding that you normally get for the term is £10,000, but over that period you only have children accessing FEE entitlements relating to £8,000. This would mean you will have a claw back or future reduction in funding applied for £2,000 because you didn’t have as many children taking up FEE places as was anticipated.

Therefore, it is important to restrict the use of the initial FEE funding amount you receive and only use the funding amount that relates to your actual take up level. The balance should be saved, preferably in a different account, to repay claw backs or saved to use if future payments are reduced.

Predicting likely take up of FEE places / hours

Part of your regular business activity should be forecasting place take up and likely numbers of children ahead. Indeed this is a key input to your marketing efforts giving an early warning that more marketing is required to fill places when your forecasts are showing low bookings and enquiries.

Your forecasts and predictions are the tools to use to immediately compare the FEE funding you are given with what you think is really going to happen in terms of place take up, and should be the more accurate figure if you keep on top of local demand.

So in summary it’s worth considering the following:

1. Make sure you have a strong understanding of likely demand and place take up before you get the FEE funding.

2. Compare your forecast with the actual funding you get, and move any surplus FEE funding into an alternative account to save for paying claw back if needed.

3. Only treat the FEE amount that matches your take up for the period as actual secured income.

More information and feedback

Obviously this is just a quick look at the FEE funding process and there’s much more to it so we will create another blog for next weeks Best Start to go into a few more aspects and things to look out for, but it would be helpful to know what challenges you may be facing in terms of managing the FEE payments and integrating with your cash flow, or whether you have other issues related to FEE payments generally. This will help us understand if there is any specific support we could give to help with this.

Please click HERE where you can email and leave us some feedback and thoughts on this subject.

General Information

Please go to the website for other information and resources and contact us with any queries you may have. 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


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