Calculate credit amount with partial period proration
This task explains how to calculate credit amounts for recurring charges with partial period proration, considering various billing rules and methods.
This section introduces how to calculate credit amount for recurring charges with partial period proration.
The calculation of credit amount for partial period depends on which of the following rules you are applying:
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Bill recurring charges for partial month (with monthly based billing periods)?
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When prorating a month, assume 30 days in a month or use actual days?
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Bill recurring charges for partial week (with weekly based billing periods)?
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Prorate recurring charges for partial period?
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When prorating periods greater than a month, prorate by month first, or by day?
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When prorating a month, assume 30 days in a month or use actual days?
If Bill recurring charges for partial month (with monthly based billing periods)? is set to Yes, credit amount is calculated with partial month proration. You can choose to calculate prorated amount either using 30 days in a month or using actual days in a month by setting the When prorating a month, assume 30 days in a month or use actual days? billing rule.
If Bill recurring charges for partial week (with weekly based billing periods)? is set to Yes, credit amount is calculated with partial week proration.
If Prorate recurring charges for partial period? is set to Yes, credit amount is calculated for partial billing period. The results of the proration depend on the combination of the When prorating periods greater than a month, prorate by month first, or by day? and When prorating a month, assume 30 days in a month or use actual days? billing rules.
Note that the following billing rule determines which calculation method is applied for credit amount:
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When bill credit for recurring charges, based on billed period or credit period?
All the new tenants have the Based on the total billing period amount and charged amount option selected by default. The previous calculation method is From effective end date to end of the current billing period .
This method calculates the credit amount based on the total billing period amount and the amount that would have been charged for the charged portion of the subscription.
- Charged amount = Price per billing period × (Prorated days ÷ Actual number of days of prorated period)
- Credit amount = Total billing period amount − Charged amount
Imagine you run a subscription service with a subscription plan billed quarterly at $100 per quarter. A customer subscribes and pays for three months, from January 1, 2023 to April 1, 2023, totaling $100. After enjoying the service for 51 days, the customer decides to cancel their subscription from February 21, 2023. Here's how the credit amount would be calculated using the new method:
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Subscription details |
Calculation |
Result |
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The credit amount is $43 The total invoice amount is: 100 − 43 = 57, and it aligns with the CCV calculation. |
This is the previous unrecommended method calculates the credit amount by multiplying the remaining portion of the subscription by the price per billing period. However, this method may result in rounding errors, leading to discrepancies in the calculated credit amount.
Credit amount = Price per billing period × (Days from effective end date to end of the current billing period ÷ Actual number of days of prorated period)
Imagine you run a subscription service with a subscription plan billed quarterly at $100 per quarter. A customer subscribes and pays for three months, from January 1, 2023 to April 1, 2023, totaling $100. After enjoying the service for 51 days, the customer decides to cancel their subscription from February 21, 2023. Here's how the credit amount would be calculated using the previous method:
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Subscription details |
Calculation |
Result |
|---|---|---|
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Calculate the credit amount by multiplying the remaining portion of the subscription by the price per billing period: 100 × (39 ÷ 90) = 43.33333333 round up to 44 |
The credit amount is $44 The total invoice amount is: 100 − 44 = 56, which means the charge amount is $56, and it does not align with the CCV calculation ($57). |