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Prorated subscription billing

Written by Remco Kroes on . Posted in Exact Online

We will soon support the ability to influence the billing cycle and flexibly define your billing cycle independent from the start date of your subscription. Helping you to better align subscription billing periods with your customer’s or your own financial or calendar periods. Using this new feature you can charge your subscribers on every first (or any day) of the month, whilst activating subscriptions on any day and partially charging them for the first invoice period (prorated billing).

Invoice period
By default, the subscription billing date is set on the day you start or activate your subscription. This start date determines the billing cycle for this subscription. For example, if you start your monthly subscription on the 15th of February, the subscription runs from the 15th of February until the 14th of March. From that day on you will be charged every 15th of the month. (see option 1 in the image below). Until now, it was not possible to adjust the billing frequency.

Flexibly adjust the invoice period
To facilitate prorated billing, we introduced a new field ‘invoice day’ (see below) to define the billing cycle. How does it work? Let’s illustrate using an example where a customer activates his monthly subscription on 15th of February. By default this subscription will be invoiced on every 15th of the month. The invoice day is set to ‘15’. If you set this invoice day to ‘1’ the first month will be partially charged up to the end of that month (from 15th of February until 28th of February) and as from 1st of March the customer is billed every 1st of the month. This also applies for up & downgrades made during the subscription period.

prorated

How does Exact Online calculate the prorated amount in a given period?
Exact Online calculates the prorated charge based on the number of days in a given month, quarter or year. For example, February 2016 has 29 days. If we activate a monthly subscription on the 15th of February we need to determine the charge for the period from 15th of February until the end of February. For these remaining 15 days the prorated amount is calculated by dividing the remaining days by the days in the given month (15 / 29 = 0.52) and multiplying the outcome with the monthly charge (100 * 0.52 = 52 eur). This also applies for up & downgrades made during the subscription period. So, if the customer makes an upgrade on the 18th of April – the charge for April will be prorated for the period 18th April until the 30th of April.

prorated2

 

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