Component Allocations: Proration

Advanced Billing supports the application of prorated charges for quantity-based and on/off components. Depending on your proration scheme, changes to the allocated quantity during a period will result in either a charge or a credit to the subscription. Alternately, you can elect to not apply proration.

Please be aware that this help article is related to Advanced Billing's Component Allocations functionality. In order for Advanced Billing to add charges for a subscriber’s components, you must report to Advanced Billing the component’s status/amount. You can learn more about Component Allocations by checking out this help article: Component Allocations Overview.

Proration Period

Proration is based on the length of the current billing period for the subscription, not the billing period configured for the product. By this we mean, proration will be calculated by using the amount of time that has passed between the current_period_started_at and the current_period_ends_at.

For example:

• The current_period_started_at date is January 1, 2020
• The current_period_ends_at date has been modified to be February 15, 2020

• The length of the recurring period is 1 month

• Let’s assume a component was allocated on the 15th of January, proration will be applied for the remaining 30 days of the billing period.
• The proration period left is not 15 days.

If you modify the current_period_ends_at, you may need to calculate and apply any prorations manually for that billing period.

Similarly, if you have a trial period that is not the same length as the product’s billing period, then you may need to calculate and apply any prorations manually during the trial period.

Proration Upgrades vs. Downgrades

When changing the allocation of a quantity-based component, Advanced Billing considers the change an upgrade if the new computed cost is greater than the previous cost, and a downgrade if it is less.

Proration Schemes

The action that Advanced Billing takes when a prorated allocation occurs is called the proration scheme. The default scheme is defined under your site configuration, under Components.

The proration scheme can also be selected at the time that the allocation is created. Because it is often unclear at the time whether the change will be an upgrade or a downgrade, you will set both schemes when the allocation is created.

Go to Config > Settings > Components.

Proration Scheme Types

Upgrade Scheme:

• “Charge the full amount of the difference in quantity.”: A charge is added for the full price of the component change.

• “Charge the prorated amount of the difference in quantity.”: A charge is added for the prorated price of the component change.

• “Do Not Charge.”: No charge is added.

Accrue Upgrade Scheme:

• “Charge immediately.”: If an option above was selected to charge the customer it will be attempted right away. If it fails, the charge will be accrued until the next renewal.

• “Accrue to the next billing period.”: If an option above was selected to charge the customer it will be attempted at next renewal.

Dunning Scheme:

• “Leave the charges on the subscription to pay for at renewal.”: If this option is selected and the mid-period allocation charge fails the charges will be accrued.

• “Initiate dunning for the subscription.”: This option allows for dunning to be initiated if a mid-period allocation charge fails.

Downgrade Scheme:

• “Credit the full amount of the difference in quantity.”: A full credit is added for the amount owed.

• “Credit the prorated amount of the difference in quantity.”: A prorated credit is added for the amount owed.

• “Do Not Credit.”: No credit is added.

Proration Credit Calculation: Proration uses the current price of the component as well as the current tax rates and calculates the difference between the cost at the current quantity and the new quantity. If the price or taxes have changed, or if the previous allocation was not charged for, then you may want to calculate the amount and apply the proration manually by adding a charge or credit to the subscription.