High-quality childcare provision relies on strong business foundations. Whether you are establishing a new setting, expanding your provision or adapting to changing demand, effective business planning and financial management can help ensure the long-term stability of your service.

Strong financial management is about more than balancing the books. It helps providers make informed decisions, respond to changes in demand, invest in quality improvements and build a sustainable business that can continue to meet the needs of children and families.

Get to Know Your Profit and Loss Information

A profit and loss report shows whether your income is sufficient to cover your expenditure. It provides a clear picture of how your business is performing and highlights areas where action may be needed. Profit and loss accounts are a key financial statement for understanding whether a childcare business is successful.

Benefits

• Identifies whether your provision is financially sustainable.
• Highlights areas of high expenditure.
• Supports decisions about staffing, fees and occupancy.
• Provides evidence for funding applications and business planning.
• Helps plan for future growth and investment.

Questions to consider

• Is income increasing at the same rate as costs?
• Which areas of expenditure have increased most significantly?
• Are all services being delivered at a sustainable level?
• Is funded provision covering delivery costs?
• Are there opportunities to expand income?

Tips

 -Review profit and loss reports monthly rather than annually.

- Compare figures against the same period last year to identify trends.

-Separate funded income, fee income and additional service income to better understand profitability.

-Monitor staffing costs regularly, as these are often the largest business expense.

Format Block 2- Financial Planning, Budget Monitoring and Cashflow Forecasting

Effective financial planning helps providers understand both their current financial position and future financial requirements. Budget monitoring allows settings to track actual income and expenditure against planned figures, while cashflow forecasting helps ensure sufficient funds are available to meet day-to-day commitments. Together, these tools support informed decision-making, identify potential financial risks early and contribute to long-term business sustainability.

Benefits

• Greater control over business finances.
• Improved strategic and operational decision making.
• Early identification of financial pressures and risks.
• Better preparation for fluctuations in occupancy and funding.
• Increased confidence when planning staffing, resources and investment.
• Improved ability to respond to changing business needs.
• Stronger long-term sustainability and resilience.

Questions to consider

• Are actual costs in line with budget forecasts?
• Have staffing, utility, food or resource costs increased?
• Is occupancy meeting projected levels?
• Is funding income meeting expectations?
• When are major expenditure commitments due?
• How would fluctuating occupancy affect the business?
• Are fee collection and payment processes effective?
• Is sufficient cash available to meet future commitments?

Tips

-Review income and expenditure monthly and compare against your budget.

- Forecast cashflow at least 12 months ahead.

- Build a contingency fund for unexpected costs and emergencies.

- Monitor staffing costs against occupancy levels and income.

- Model best-case, expected and worst-case occupancy scenarios.

- Factor in termly fluctuations and school holiday attendance patterns.

-Include known cost increases, wage changes and planned investments in forecasts.

- Use management information regularly throughout the year rather than waiting until year end accounts are produced.

-Review financial performance trends against previous years to identify emerging issues and opportunities.

providers can make informed business decisions, improve financial resilience and plan confidently for future growth and

Pricing, Fees and Breakeven Calculations 

Understanding your costs, setting appropriate fees and knowing your break-even points are essential for maintaining a sustainable childcare business. Your break-even point identifies the minimum occupancy level or income required to cover all operational costs, while a well-planned fee structure ensures that the provision remains financially viable and able to invest in high-quality experiences for children.

Benefits

• Helps ensure income covers the true cost of delivering childcare.
• Supports informed decisions about fees, occupancy and staffing levels.
• Improves long-term financial sustainability and resilience.
• Provides transparency and clarity for families.
• Supports business growth and investment planning.
• Helps identify financial risks before they impact the business.

Questions to Consider

• What occupancy level is required for the business to break even?
• Do current fees reflect the true cost of delivering childcare?
• How would lower occupancy levels affect sustainability?
• Are funded places being delivered sustainably?
• When were fees last reviewed?
• Are parents clear about what is included within fees and what may incur additional charges?
• What impact would staffing, wage or utility cost increases have on profitability?
• Is the current pricing structure supporting future investment and business development?

Top Tips

- Calculate your break-even occupancy regularly and review it whenever costs increase significantly.

- Understand the true cost of delivering an hour of childcare, including staffing, premises, resources, training and overheads.

-Review fee structures at least annually to ensure they remain sustainable.

-Compare actual occupancy against break-even occupancy throughout the year.

-Consider the impact of funded entitlements, additional services and optional charges when reviewing income.

-Communicate fee reviews and any changes clearly and in good time to families, inline with your contracts.

- Ensure charging policies are transparent, consistent and align with funding requirements.

-Use break-even data when considering expansion plans, staffing changes or investment decisions.

 Support Available

Our Business and Finance Advisors can help providers review business performance, identify opportunities to improve financial resilience and develop sustainable business plans and financial forecasts tailored to individual settings. With

• Budget planning and forecasting
• Cash flow management
• Income and expenditure reviews
• Understanding funding streams and sources of income
• Business sustainability planning
• Financial risk management
• Business health checks
• Charging policies and additional income opportunities
• Business model reviews

Please click here to access our Financial Stability Resources: (Link to tools and resources page)

If you would like to discuss your business needs with a Business and Finance Advisor, please complete our Business and Finance Advisor Consultation Request. (Link to new request form)