Proration

Overview

When prorating a subscription, you can choose whether you are billing in advance, or arrears.

1. Billing in advance - Choose this if you charge or invoice your customer before delivering or providing the service to them

2. Billing in arrears - Choose this if you don't charge or invoice your customer until after you have already delivered or provided them with the service

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Currently, ChargeOver does not support proration for products that use unit, volume, or tiered pricing.

Enable proration

1. Go to Settings, then Add-Ons and More Add Ons
2. Search for Proration and select Get Started
3. Select how you want to calculate proration. There are two options. You can either allow any admin user in your account to select the proration dates, or you can allow ChargeOver to automatically calculate the proration dates for you

4. Save your changes

Create a prorated invoice for a new subscription

1. Go to the Subscriptions tab on the left side navigation
2. Click the New Subscription button and choose the correct customer
3. Choose the Product for this subscription
4. Change the Prorate option to "Service billing in advance"
5. Specify the pro-ration dates - usually this will be the current day of to one day before you want them to regularly receive an invoice

• For example, if you want them to be regularly charged on the 1st of the month, choose the 31st

• If you want to, you can set the customer's payment method or any other subscription details or custom fields you need to

6. Click the Continue button at the bottom of the page
7. A prorated invoice will automatically be created immediately. The invoice will reflect the prorated amount and prorated dates on it automatically

The next invoice or charge date will be set to the 1st of the month automatically.

Create a prorated invoice

If a customer wishes to change their subscription in the middle of a payment cycle, ChargeOver can either create prorated invoices or offer a credit.

1. Find the subscription and view the subscription details
2. Find the line item you want to edit and click the pencil icon to get to the Upgrade or Downgrade option

3. You'll be given a number of proration options. First, choose the plan the customer is changing to in the drop-down menu
4. Choose whether this service or plan is billed in advance. Which means you charge or invoice your customer before delivering or providing the service to them, or billed in arrears, where you don't charge or invoice your customer until after you have already delivered or provided them with the service
5. If you want to give the customer a credit for the unused portion of the old plan, check the "Give credit..." checkbox
6. You can choose whether to create a prorated invoice right away, or put the prorated charge on their next normally scheduled invoice

• If you chose to create a new prorated invoice now, then a new prorated invoice will be immediately and automatically created for the customer
• The new prorated invoice will automatically reflect the proration dates and if you credited the customer for the unused portion of their old plan, it will reflect the credit as well

Common scenarios of proration

Prorate a new subscription

A common scenario might be that you charge customers on a certain day, such as the 1st of each month.

However, a customer signs up for and starts using your service on on the 13th of December.

You want to be billing the customer on the 1st of January when you bill the other customers, but you also need to bill the customer for the time they spent using your service from December 13th to December 31st.

In this case, if you bill in advance, you would set your subscription up like this

If you generate an invoice immediately for the prorated amount, your invoice would look like this

As you can see, the customer is billed for just the amount that they owe for using the service from the time they signed up to date of the next billing cycle.

Now that you have generated this prorated invoice, the customer will be invoiced the full amount on the desired date of January 1st and on the 1st of each month going forward.

If you choose to bill in arrears instead of in advance, then the prorated invoice will generate the day after the prorated billing cycle ends - in this scenario, on January 1st.

Prorate an existing subscription

This example is for when you want to change an already existing subscription. For instance, you may need to change, add, or delete a line item from the subscription.

If you choose to bill in advance, a prorated invoice for the subscription will be generated right away.

If you bill in advance and a customer is subscribed to a service for $10 a month, their existing subscription might look something like this.

Now, let’s say the customer is so happy with your product that they want to upgrade their subscription to an even more awesome service.

If you bill in advance, you’ll edit your ChargeOver invoice to something like this.

Now, since you bill in advance, the customer has already paid for the original $10.00 plan for the month of February 1st to March 1st. However, they decided to upgrade their subscription on February 22nd, which is during the billing cycle they already paid for.

Now, since they get to use the upgraded service between February 22nd and March 1st, which is the end of the billing cycle, they need to be charged for that upgraded service. But again, they already paid for the original one.

ChargeOver takes care of this by generating a prorated invoice that charges the customer only the extra amount that they owe for the portion of the month where they used the new plan.

In this example, the customer paid $10.00 for the month originally, and upgraded to a plan that costs $20.00 a month, so the prorated invoice will look like this.

As you can see, the invoice is only charging the extra amount the customer owes from changing the plan partway through the billing cycle.

In the case of billing in advance and downgrading a subscription, so the new plan costs less than the previous plan they paid for, you will be given the option to issue a credit to the customer for the unused portion of the old plan.

If you choose to bill in arrears and for the invoice to be generated at the end of the current billing cycle, the invoice will have both the prorated portion of the old line item on it as well as the new plan or line item.

Change quantity of a line item

Another situation in which you may want a subscription to generate a prorated invoice is if you need to change the quantity of a line item in an existing subscription.

If you choose to bill in advance, an invoice will be generated immediately for the difference in quantities.

So, if the customer was originally billed for a line item with a quantity of 1, but then part way through the billing cycle upgraded their plan to a quantity of four, then the prorated invoice will generate the amount for a quantity of 3. This would be the amount that was unaccounted for by the original invoice that was billed in advance. This scenario would look something like this.

The customer was billed for this subscription.

Then, after already being billed in advance, the customer decided to upgrade their plan to a quantity of 4. In ChargeOver, you’d edit the subscription like this.

The prorated invoice is generated for the quantity of 3 that was not originally charged to the customer.

If you choose to bill in arrears, you’ll likely want to choose to have the prorated invoice generated at the end of the current billing cycle. When it generates, the invoice will have the prorated portions of the old line on it, as well as the prorated difference in quantities.