Managing Rising Costs without Compromising Quality
Utility prices are set to rise again next month and these increases in costs are now one of the biggest threats to early years sustainability. Staffing, food, insurance, consumables, training and compliance - everything is more expensive and funding rates just aren't keeping up. For many settings, especially charity-managed ones, the challenge is simple but brutal: how do we stay financially viable without compromising quality or burning out our staff?
The answer isn't one magic fix. It's a combination of smart planning, transparent governance and operational discipline. I don't have a magic wand but here are some ideas for managers and trustees to work together to manage rising costs confidently and responsibly.
Understand Where Costs Are Rising with Real Data
Before you make changes, you need clarity. Rising costs often feel overwhelming because they're felt before they're measured.
Break down your cost increases into categories:
Staffing - including overtime, agency staff, pay rises, pension contributions.
Food and consumables.
Utilities - electricity, heating, water, business rates
Insurance.
Maintenance and compliance.
Training and CPD.
Digital systems and subscriptions.
Use your management accounts (or my very useful Business Planning Tool) to compare term-on-term or year-on-year changes. Trustees should be given a simple summary showing what has increased, by how much and why. This should also include what the risk is if nothing changes.
Stabilise Staffing Costs First
These are your biggest pressure and usually account for 70-80% of expenditure. This means even small inefficiencies add up quickly.
Key actions:
Review staffing rotas for unnecessary overlap.
Reduce overtime where possible.
Avoid using agency staff unless absolutely essential.
Ensure ratios are met efficiently, not generously.
Use staggered shifts to reduce peak staffing.
Review lunch cover patterns.
Support staff attendance to reduce last minute cover costs.
This isn't about cutting quality but is about deploying staff intentionally.
Review Your Fee Structure and Funding Model
With funded hourly rates now accounting for most of the income in your settings, an annual review of fees is less productive but depending on your business model should still be undertaken.
Other actions to consider:
Ensure consumables charges are lawful, transparent to parents and realistic.
Check funded hours aren't creating a loss.
Consider removing session types that consistently run at a deficit.
Review discounts (sibling, staff, etc) to ensure they still make sense.
Parents understand rising costs when communication is clear, honest and timely.
Reduce Non-Essential Spending Without Cutting Quality
Quality doesn't come from expensive resources but from skilled staff, strong relationships and thoughtful environments.
Smart cost-saving ideas:
Pause non-urgent purchases.
Consider buying in bulk with neighbouring settings.
Review subscriptions and cancel unused ones.
Switch to energy-efficient lighting.
Reuse and repurpose materials.
Apply for local grants or community donations.
Review cleaning contracts and frequency.
For charity managed settings also consider your fundraising activities and whether these could be increased if bigger purchases are needed.
For more cost saving tips read this blog.
Strengthen Financial Oversight
Trustees play a key role and whilst they don't need to be accountants, they do need to understand the financial risks. Rising costs require shared decision making, not isolated firefighting when it's too late.
Trustees should receive:
Monthly or termly finance updates.
Clear explanations of cost increases.
Scenario modelling (best, expected, worst case)
Early warnings when cashflow is tightening
Options for stabilising the budget.
Improve Occupancy and Income Without Overstretching Staff
Increasing income doesn't always mean adding more children. Sometimes it means improving patterns for example promoting under-filled sessions or encouraging parents to increase hours.
Also consider:
Reviewing session structures.
Offering wraparound or extended sessions.
Partnering with local schools or childminders.
Reducing/extending the age range.
Running seasonal fundraising events.
Even small increases in occupancy can make a big difference to sustainability.
Build Long Term Sustainability
Rising costs aren't a temporary issue. As the new normal settings need long term strategies, not short term firefighting.
Incorporating a sound business plan into the operational management is vital for sustainability. It should include:
Annual fee review.
Annual staffing model review.
Annual funding model review.
Succession planning for trustees (read more in this blog)
A reserves strategy
A 3-year financial forecast (find one here)
Clear governance oversight.
Final Thoughts
Rising costs are challenging but they can be manageable with clarity and proactive planning. As early years settings you are incredibly resilient and with strong governance and thoughtful leadership you can navigate financial pressures without compromising the quality children deserve or running your staff into the ground.
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