Configure Proration Schemes for Components

Advanced Billing supports prorated charges for quantity-based and on/off Components. Depending on your proration scheme, changes to the allocated quantity during a billing period can result in either a charge or a credit to the Subscription. You can also choose not to apply proration.

This article explains how proration works with Advanced Billing’s Component Allocations functionality. To add charges for a Customer’s Components, you must report the Component’s status or quantity to Advanced Billing. Related Topic: 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. Proration is calculated using the time between current_period_started_at and current_period_ends_at.

For example:

• current_period_started_at is January 1, 2020.
• current_period_ends_at is modified to February 15, 2020.
• The recurring period length is one month.
• A Component is allocated on January 15. Proration applies to the remaining 30 days of the billing period.
• The remaining proration period is not 15 days.

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

If a trial period does not match the product’s billing period length, you may also need to manually calculate and apply prorations during the trial.

Proration Upgrades and Downgrades

When you change the allocation of a quantity-based Component, Advanced Billing determines whether the change is an upgrade or a downgrade:

• Upgrade: The new computed cost is greater than the previous cost.
• Downgrade: The new computed cost is less than the previous cost.

Proration Schemes

The action Advanced Billing takes when a prorated allocation occurs is defined by the proration scheme. The default scheme is configured at the site level under Config > Settings > Components.

You can also select the proration scheme when creating the allocation. Because it may not be clear whether a change will result in an upgrade or downgrade, you must define both upgrade and downgrade schemes at the time of allocation.

To configure the default proration scheme:

1. Navigate to Config > Settings > Components.
2. Select the appropriate global Component setting.

Select the appropriate global Component setting.

Proration Scheme Types

Upgrade Scheme

• Charge the full amount of the difference in quantity: Adds a charge for the full price difference.
• Charge the prorated amount of the difference in quantity: Adds a charge for the prorated price difference.
• Do Not Charge: No charge is added.

Accrue Upgrade Scheme

• Charge immediately: Attempts to charge the Customer immediately. If the charge fails, it is accrued until the next renewal.
• Accrue to the next billing period: Attempts the charge at the next renewal.

Dunning Scheme

• Leave the charges on the Subscription to pay at renewal: If a mid-period allocation charge fails, the charges are accrued to renewal.
• Initiate dunning for the Subscription: Initiates dunning if a mid-period allocation charge fails.

Downgrade Scheme

• Credit the full amount of the difference in quantity: Adds a full credit for the amount owed.
• Credit the prorated amount of the difference in quantity: Adds a prorated credit.
• Do Not Credit: No credit is added.

Proration Credit Calculation

Proration uses the current Component price and current tax rates to calculate the difference between the existing quantity and the new quantity. If pricing or taxes have changed, or if the previous allocation was not charged, you may need to manually calculate and apply a charge or credit to the Subscription.