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Financial management and planning
There are a number of costs involved in running an early years provision — from bills and utilities to staff payroll and equipment. You must be confident when budgeting that the income you receive from fees and government funding will be enough to cover all your outgoings, and allow you to provide a high quality service to families.
A business plan will help you outline your expected activities for the year ahead, and can be used to plan for the future operation and development of your services. This is also a useful tool when applying for funding, as it explains to potential funders how their money will benefit the provision.
You may find our Accounts Record useful for recording your annual finances.
Sources of government funding
Early entitlement funding
You can register with your local authority to claim funding to provide early years education places for the three- and four-year-olds (universal or working families); two-year-olds (disadvantaged families or working families)l; and under-twos (working families).
The ’15 hour’ entitlements are, in reality, offers of 570 hours of care and education per year, while the ’30-hour’ offers are1,140 hours a year. You may offer the funded places in term-time-only (38 weeks) or stretched across a longer period of time.
Further information on the entitlement offers is available on the Childcare Choices website.
Parents earning at least the equivalent of 16 hours per week at the national living wage, and earning less than £100,000 per year, are eligible for the ’30-hour’ offer for three- and four-year-olds, as well as the ‘working family’ offers for two-year-olds and under-twos.
The 30 hours funding is also eligible for families who do not meet the minimum earning criteria if they are both employed but one or both of the parents are temporarily away from the workplace on parental, maternity or paternity, adoption leave, or on statutory sick pay.
Additionally, families can claim the funding even if they do not meet the criteria, when one parent is employed but the other either has substantial caring responsibilities, or is disabled or incapacitated and specific disability or caring benefits are being claimed.
Parents cannot be charged for the funded sessions; however, the cost of any additional sessions, plus consumable items such as drinks, meals and nappies, can be covered by parents as long as these charges are wholly voluntary.
Tax-free childcare
The tax-free childcare scheme aims to make childcare more affordable for working parents. Parents set up an online account to pay for childcare with a registered provider, and the government will contribute £2 for every £8 parents spend. The scheme gives eligible families a maximum of £2,000 per child per year, or £4,000 for children with disabilities.
Parents can use this scheme alongside the 15 or 30 hours funded entitlement, but cannot be in receipt of Universal Credit or childcare vouchers.
The eligibility criteria for both tax-free childcare and the funded entitlements is largely the same. Full details of the tax-free childcare eligibility criteria is available on the Childcare Choices website.
Early years providers need to be registered with Ofsted or another regulator and sign up to the scheme with HMRC in order to receive payments from parents. They will receive a user ID by letter and will also need to supply their bank account details, Unique Taxpayer Reference number and postcode or National Insurance number.
Early Years Pupil Premium
The Early Years Pupil Premium is funding of up to £570 per year to improve educational outcomes for disadvantaged children by spending on activities, staff training and resources that specifically impact educational outcomes for disadvantaged children.
Children are eligible for the Early Years Pupil Premium (EYPP) if they receive at least one hour of free early years entitlements provision and their parent or carer receives one or more of the following benefits:
income-based Jobseeker’s Allowance
income-related Employment and Support Allowance
support under part 6 of the Immigration and Asylum Act 1999
the guaranteed element of Pension Credit
Universal Credit, if the parent or carer’s annual net household income is less than £7,400, not including any benefits
If the child was formerly looked after by a local authority in England or Wales through adoption, a special guardianship order or a child arrangements order, they are also eligible.
For children aged three or four, EYPP is only payable on the universal 15 hours’ entitlement.
A model form and letter to help providers identify which children are eligible for the Early Years Pupil Premium can be found here.
Disability access funding
Children may be eligible to receive disability access funding (DAF) of at least £938 per year if they are in receipt of Disability Living Allowance for children and access early entitlement funding. They do not need to use all their hours to be eligible for disability access funding.
DAF is paid as a lump sum. If a child eligible for the DAF is splitting their free entitlement across two or more providers, local authorities are expected to ask parents to nominate the main setting and pay the DAF to that nominated main setting.
If a child receiving DAF moves from one setting to another, the new setting is not eligible to receive DAF funding for this child until the anniversary of the first payment has passed.
Special educational needs inclusion funding
Special educational needs inclusion funding (SENIF) is targeted at supporting children with low-level or emerging special educational needs who are below compulsory school age and who are eligible for the entitlements.
Local authorities are expected to fund their SENIF using funding from the early years block and/or the high needs block of their Dedicated Schools Grant allocation.
They should also publish details on how their SENIF will be used to support their early years SEN cohort. These details should include how providers can access funding, the eligibility criteria for the fund, the planned value of the fund at the start of the financial year, and the process for allocating the fund to providers
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