Finance best practice for nurseries

Starting up a new nursery or pre-school, like starting any new business, can be daunting - especially when it comes to making the numbers add up. That's why we've put together a practice checklist to help you on your way.

Develop your business plan

Writing a business plan will give you a clear vision of what you want to achieve for your business. A large part of your plan will focus on a financial strategy: detailing your start-up costs and ongoing expenditure, and working out where your income will come from. Include the following financial information in your business plan:


  • Start-up costs
  • Weekly expenses
  • Monthly expenses
  • Annual expenses


  • Private fees from families
  • Early years entitlement (England) or funded places
  • Early years Pupil Premium (EYPP) (England only)
  • Grants or loans
  • Investments

Don't forget that it may take time to fill your childcare places. How many hours of childcare do you need to sell to cover your expenditure?

For a breakdown of some of the expenses you'll need to think about, see starting your nursery or pre-school.

Create a cash flow projection

Cash flow projections can be created for any length or time. For example, you could have one to monitor your weekly or monthly cash flow. It's also important to create a cash flow projection detailing your expected income and expenditure for the first six months and the first year of your business. This will help to make sure there's enough money coming in to cover your expenses and to keep your business going.

Try creating two separate columns for each month - one for projected income and one for actual income - to monitor whether your financial projections are on track.

Thinking ahead will also help you to prepare for changes, and to ensure that your business stays sustainable.

Set your prices carefully

It may be stating the obvious, but it's important to set the right price for your services to ensure that your income exceeds the cost of providing the service.

Understanding your costs is vital. 

Key questions to consider when setting your price include:

  • What do other settings charge in your area?
  • Does your business plan ensure that your funding structure matches the vision you have for your setting?
  • Does your setting match - or exceed - what other local providers offer, and can you reflect that in the price you charge?
  • Will you offer part-time places as well as full-time?
  • Will you offer childcare through the school holidays or term-time only?
  • Will you offer funded childcare places? How many?
  • If you offer funded places, how will the funding rate change (for instance, will you have a lot of 2-year-olds about to turn 3)?
  • What costs are associated with your premises and what equipment will you need to buy? Consider fixed costs, such as rent or mortgage, as well as variable costs that increase with the number of children at your setting, such as food, craft activities and staffing.
  • What are the increases to staffing costs that lie ahead - think about the National Living Wage and National Minimum Wage and other costs (such as pensions).
  • What training and continuing professional development will you offer for yourself and for your staff?
  • Consider essential training such as renewing first-aid certificates, as well as safeguarding training.
  • Have you planned a contingency budget - that vital "just in case" money?

Keep on top of invoicing and payments

It is good practice to invoice monthly in advance, to avoid cash flow issues, adding any extras from the previous month to the new invoice (such as extra hours or outings).

Here are some tips to help you keep on top of invoicing:

  • Create a standard template - every invoice should include your bank details and your hourly or daily rate.
  • Encourage parents to pay by BACS or direct debit, and don't accept cheques.
  • Use online banking and check your bank account carefully and regularly.
  • When parents pay with a combination of childcare vouchers and BACS transfers - ask parents to confirm how they have split payments.
  • Use online solutions such as Kinderly to make invoicing quick and efficient, and to set up alerts for any late or non-payments.
  • Make it clear when you expect all invoices to be paid.
  • Deal with non-payment promptly - send a polite reminder with the invoice re-attached, in case they missed it.
  • Build reviewing your finances into your business routine - set aside some time each week to check payments have come in. Look back quarterly as well - is there a pattern emerging?

Deposits and retainer fees

Decide whether your deposits and retainer fees will be refundable or not. If you have parents who want to hold their child's place for several months or more in advance, it can be a good idea to charge a non-refundable retainer fee to avoid losses due to last-minute drop outs. If you are planning to refund the fee at the end, you can call it a deposit and state this in your paperwork.

Deposits for all funded places must be fully refundable. Of course, if the parent doesn't take up the place, then the provider is entitled to keep the deposit. In addition, local authorities have discretion to determine when deposits for funded places must be refunded. If they think a deposit will prevent take-up, for example for a 2-year-old place, then local authorities can also insist that they have waived. Be clear in your paperwork what you plan to do.

Your contracts with parents or guardians should detail your terms of payment, including deposits and retainer fees. They should also set out your terms for sickness, annual leave and additional expenses such as outings.

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