Billing Management: #2 Fair way of Billing- Prorated Billing

Billing Management: #2 Fair way of Billing- Prorated Billing

Hello,

From speaking about the traditional ways of billing in the previous post, we are moving into the deep sea of billing. We are now in a zone to break out the most complex yet, I would call it the fairest way of billing, the Prorated Billing.

Prorated Billing ensures that customers pay only for the exact portion of a service they consume. Whether they join mid-cycle, switch plans, or cancel early, proration guarantees transparency and fairness. 

What is Prorated Billing?  
In short, prorated billing involves splitting charges according to the length of service used within a billing cycle. Instead of charging the customer for the entire month regardless of when they sign up or amend the subscription, businesses calculate charges accurately based on time or usage. This directly enhances customer trust and satisfaction and eliminates disputes over charges.
​
In this post, we will understand how proration works in different industries by examining the major industry types that need/must have proration in their billing strategy.

Scenario: SaaS  

A SaaS customer starts the month on the Basic plan, which costs $30/month. Midway through the billing cycle, on the 15th, they realise they need additional features and decide to upgrade to the Pro plan, which costs $60/month.

Without proration, businesses might charge the full $60 or keep them on Basic until the next cycle, which is unfair. With proration, this can be solved by splitting the bill into the part that will be used and the period that has elapsed.

In this scenario, part of the month is charged at the Basic plan cost, and the remaining is charged at the Pro plan cost. 

Old Plan

New Plan

Basic Plan: $30

Pro Plan: $60

Charges per day: $30/30=$1

Charges per day: $60/30=$2

No.of days remaining: 15

No.of days to be charged: 15

Credits Remaining: $1x15=$15

Amount to be charged: $2x15=$30

Net Payable: Amount to be charged- Credits Remaining: $30-$15= $15

The Final Invoice Amount must be charged on the 15th, and the customer's subscription will be moved to the Pro Plan.

Scenario: Telecom  

Imagine a customer activating a mobile plan costing $60 on the 20th of the month. The company has a standard billing cycle of 30 days. Some businesses might activate the plan for the full plan amount and allow it to be charged again on the set billing cycle. However, that's not the ideal approach.

With Proration, the days before the activation date are excluded, and charges are made only for the exact number of days used.

  • Plan Amount: $60

  • Charge per day: $60/30= $2

  • No.of days to be billed: 10

  • Final Payable Amount: $20

 The Final Payable Amount will be charged on the plan activation date, and the next charge will occur after 10 days, aligning with the billing cycle.

Scenario: Streaming Service  

A streaming subscriber who is active in the $120/month Premium plan decides to switch to the $60/month Standard plan after 10 days of usage in the current billing cycle.

Without proration, the customer might feel overcharged for unused Premium days. So, to balance the charges between the higher-priced plan and the lower one, credits will be added to the customer account, which can either be refunded or adjusted for the next invoice cycle.

Old Plan

New Plan

Premium Plan: $120

Standard Plan Cost: $60

Charges per day: $120/30= $4

Charges per day: $60/30= $2

No.of days used: 10

No.of days remaining: 20

Charges for used days: $4x10= $40

Amount to be charged: $2x20=$40

Remaining Credits: $80

 

Net Credit: Remaining Credits- Amount to be charged for 20 days: $80-$40= $40


The Net Credit will stay with the customer account and will be applied to the next invoice, or it can be refunded.

Proration Across Industries 

While SaaS, Telecom and Streaming services are the most common businesses where prorated billing happens quite often, other industries need this,

  • Logistics Companies operate with standard shipment charges. They might need proration when the volume of the consignment changes in the middle of the cycle.

  • Internet Service Providers use this when there is a change in plan within the billing cycle.

  • Fintech and Payment Apps prorate service fees when accounts are opened or closed in the middle of the billing cycle.

Zoho Billing has the finesse to handle these contract amendments effortlessly across industry types. Whether it's a mid-cycle upgrade, a partial cancellation, or a new customer subscribing during the middle of the billing cycle, Zoho Billing ensures invoices are adjusted seamlessly. Proration can be enabled in Zoho Billing with a simple toggle, and the application automatically takes care of all the math in the backend.

Proration Billing is not a burden but a gift wrapped in a hard cover. 

Offering fair charges based on usage during billing increases confidence and provides businesses with a reputation for being fair and transparent. But what about usage that happens before it hits the bill? Even with proration in place, there are scenarios where usage happens before it's billed. For instance, a customer may request an add-on, consume additional resources, or make a one-time transaction in the middle of the billing period. These often fall into the category of unbilled charges.
​
Notes
In the next post, we will explore how businesses manage these unbilled charges and why keeping them in check is critical for accurate billing.

Stay Tuned! 


    • Sticky Posts

    • Community Learning Series | Digest #5 — September 2020

      Dear customers, We're happy to bring you the September edition of our #CommunityDigest! Keep track of your subscription KPIs right from your smartphone: Last month, we enhanced our Android mobile app to help our customers get daily updates on their business health. We got to know from a lot of customers that this has made their job much more easier because they no longer have to keep a reminder to manually check on the previous day's revenue or activations. If you have not downloaded it yet, here's

    • Community Learning Series | Digest #4 - August 2020

      Dear customers, We hope you're staying safe and healthy. I'm happy to bring you the fourth edition of our #CommunityDigest with some brand-new updates from us. 1. Daily Business Updates (for Android users) The Zoho Subscriptions Android app has got a cool new update: You can now get a push notification to your smartphone that lets you know how many activations and cancellations have taken place, and what's the net revenue for the previous day. The best part is, you can tell the app when exactly you

    • Community Learning Series | Digest #3 - July 2020

      Dear customers, We hope you're staying safe and healthy. We're glad to bring you the July edition of our #CommunityDigest. New community members can view our previous newsletters here. This time, we have two major updates and three interesting topics for you: 1. Zoho Subscriptions Developer Community Since the inception of Zoho Subscriptions, our team believed that the recurring billing platform we provide should be able to offer an extensive API library that empowers businesses to automate most

    • Introducing: Community Learning Series | Digest #1 - May 2020

      Dear customers, We hope you are staying safe and healthy. Helping businesses manage their customer subscriptions more efficiently has always been, and always will be, our goal at Zoho Subscriptions. We strongly believe this is possible if we grow together as a community and share what we know with each other. To nurture this shared learning experience, here is our brand-new Community Learning Series! ​ Welcome to the first edition of our digest! Each edition of our community digest includes guides

    • Recent Topics

    • Kaizen #121 : Customize List Views using Client Script

      Hello everyone! Welcome back to another interesting Kaizen post. In this post, we can discuss how to customize List Views using Client Script. This post will answer the questions Ability to remove public views by the super admin in the Zoho CRM and Is

    • Zoho Books | Product updates | June 2025

      Hello Users, We’ve rolled out new features and enhancements in Zoho Books, from the option to record advances for purchase orders to dynamic lookup fields, all designed to help you stay on top of your finances with ease. Introducing Change Comparators

    • Widget Upload to CRM Fails with “Page Not Found” – Even with Correct Index Path

      I'm building a simple widget to export Contact data to CSV in Zoho CRM, triggered via a custom button. The widget uploads cleanly, appears in the widget list, and is successfully assigned to a Contact detail view via a custom button. But when clicked,

    • Account disabled

      I have an issue I need help with. Whilst trialing ZOHO CRM I created the following: Account1 (-------------) using m__ame@m__rg___s__i__.___.__ and 2 personal emails Account2 (-------------) using a personal email and 2 users _al__1@______________._o_.__

    • How can we manage the tags in ticket

      Allowing agents to use Tags indiscriminately can cause havoc. We could not find tag management where 1. The admin can create Tags beforehand for use by Agents 2. Permission can be allocated which roles/profiles can use existing tags or add new tags 3.

    • Feed Notifications filter?

      I'd like to have filter settings for Feed Notifications just like we have for Personal Email. If someone dumps a bunch of files into a project, we get a notification for every file!

    • Custom fields and filters for Timesheet

      HI Zoho Projects team. IT would be great and useful if we can add custom fields to the Timesheet design And is needed more options for filtering the timesheet dashboard, like "Milestones" and task list asociated to the record. Thank you

    • How do I rename the dropdown that contains a form and a report?

      I want to rename this, but I can't find how

    • Filtering two fields

      Hoping somone can assist, i am trying to create a report to show values from two different fields. e.g I have Field 1 Field 2 In some records, fields 1 and 2 are both "yes"; in other records, only one of the fields has the value "yes". Can we generate

    • Unable to Convert Quote to Invoice – Integration Active but User Not Recognized

      I’m having trouble converting a Quote into an Invoice inside Zoho CRM, even though the Zoho Finance Suite integration is enabled (Invoices, Quotes, Products, and Customers are all checked), and my user is an Admin in both Zoho CRM and Zoho Books, using

    • Owner drawings

      I entered an owner’s drawing transaction in 2023 but it’s still appearing on 2024 books. Is that supposed to happen? Or should Is there an additional step? I prefer for this transaction not to appear.

    • Running Balance in Account Statement.

      Running balance should come by default in the accounting statements but in ZOHO we need to customize every time to get the running balance in accounting statement. I did not understand, when the bank account statement opened from Bank Menu can show the

    • Importing Invoices

      Dear Team I used the enclosed csv file to import some invoices and it worked fine. I had to delete the file and when I am trying to re-upload it, I am getting the error for invoice number and branch "Resource does not exit." I tried a number of different

    • Enhance "Send Cliq Notification" Action in Zoho Desk Workflows (and also add Happiness Rating Support)

      ello Zoho Desk Team, We hope you're doing well. We’d like to submit a feature request regarding the “Send Cliq Notification” action available in Zoho Desk workflows — specifically in workflows triggered by Happiness Ratings, but also relevant to all workflows

    • Treatment of Non-Refundable Income after cancelling an Invoice

      A customer made part payments of 30,000 for an invoice 0f 100,000, and then he is unable to pay up the remaining and has asked for a refund. As per company policy, he can only get 75% of the amount paid, which is 22,500. The remaining 7,500 is non-refundable

    • I need refund

      I have purchased the Zoho Book standard plan; I had the impression that I would get the purchase > Bill feature. After purchasing, I found that billing is not included in the Zoho standard plan. I immediately canceled the subscription. I love the product,

    • Handling identifiers during an import

      Importing your data When importing data into an application, it is crucial to prevent data loss or duplication. These types of errors can hinder the development of a clean and well-organised database, which is essential for effective data management and

    • Creating Deposit Invoices

      Hi, we are a company that does project based work with a request at the begining of each project for a deposit payment. At the moment we are creating invoices for the deposit and an invoice for the completion of the project, however they are completely

    • Marketer’s Space - WhatsApp Pricing Update: What Marketers Need to Know and Do

      Hello Marketers, Welcome back to Marketer’s Space! WhatsApp made changes to their pricing model on July 1, 2025, moving from conversation-based pricing to a per-message pricing model. This week’s post focuses on what these changes mean for your WhatsApp

    • It's time to say goodbye to Zoho Recruit for me.

      Hello, I have been a Zoho Recruit user since 2013. The tool has evolved, with a better UI, new features and so on. The pricing is still a great asset too. BUT, that being said, important features are not coming fast enough. I tried to share my point of

    • change subscription within customer portal

      Would be great for the customer to be able to change their own subscription (or restart existing one) within the customer portal. Also, would like to be able to have early termination fee on subscriptions if canceled early.

    • How to make the add-on optional at the time of subscription?

      The scenario is this, we have a service which has optional add-ons. Like the customer who purchased the subscription may or may not want to get the add-on. In our case if the customer choose the addon we have monetary benefit. In case the user does not

    • Unable to add attachments to knowledge base anymore

      I have been adding articles to knowledge base in Zoho Desk (as part of Zoho One). Today suddenly i found that I am unable to upload and attachments to the articles. I get the following error: "Attachment couldn't be added." I have uploaded the screenshot

    • Advanced factors for multiple scoring rules: Now with Zia scoring automations for all modules

      Greetings all, We're happy to offer improved scoring features by adding extra scoring factors, including Zia Scores, in our multiple scoring rules (MSR) feature. These new factors—which empower existing traditional scoring factors—include criteria for

    • Sortie de Zoho TABLE ??

      Bonjour, Depuis bientôt 2 ans l'application zoho table est sortie en dehors de l'UE ? Depuis un an elle est annoncée en Europe Mais en vrai, c'est pour quand exactement ??

    • Restrict Agents from Editing Shared Custom Views in Zoho Desk

      Hello Zoho Desk Team, We hope you're doing well. We’d like to submit a feature request regarding the custom views functionality in Zoho Desk. 🎯 Background We’re actively using custom views to filter and display tickets for different teams based on specific

    • Introduction Dario Schiraldi Deutsche Bank Executive

      Hello Everyone, Dario Schiraldi serves as a key leader at Deutsche Bank, where he plays a crucial role in shaping the bank's strategic direction and driving operational success. With a solid foundation in finance and leadership, Dario is committed to

    • Is Zoho Shifts included in the Zoho One plan?

      In case the answer is no: there's any plan to make it available via One? Thank you

    • Feature Request: API Access for Managing Deluge Functions (with OAuth & Change Tracking)

      Hi everyone, I wanted to share a thoughtful request that came in from one of our Zoho clients this week. I believe many of us as partners and developers might relate to it. “One quick item to flag: we’d love an official way to manage Deluge functions

    • Moving Subscriptions from one Customer to another

      We frequently need to move subscriptions from one Customer to another Customer in Zoho Billing and the only way we have figured out to do this is to cancel it in the old owner's profile and manually recreate in in the new owner's profile. In doing this,

    • how to add new line in Deluge?

      I want to make string with line separation like this: this is the first line second line third line I have tried to use \n <br> or </br> inside the string but I can't achieve the result like the example above. I want to create a task by using custom function

    • How to pause a subscription/recurring order ?

      Hello, I'm evaluating Zoho Subscriptions for a food co-op where members order a box of produce every week. The software that we're currently using allows members to set up a recurring order. Members can pause the recurring order when they don't want a box for a while and then resume it later. Is it possible to pause/resume a subscription ? Thanks John

    • Hosted Payment Pages - how to update the address in zoho billing

      I"m playing around with the muti-page hosted payment pages which have places for customers to enter their addresses when paying. Why does this not update their address in Zoho Billing after payment? What can I do to make this happen?

    • Tracking training certification expirations

      Hi Zoho Community! I'm looking for some input on the best and most efficient ways to track training expirations in Zoho CRM. I have a very specific workflow that I am looking for - my company offers trainings, and the certification expires every 2 to

    • Kaizen #164 : Client Credentials

      Hello everyone, Welcome back to Kaizen. In this post, we will discuss Client Credentials Flow and when it can be used. What is Client Credentials Flow? According to RFC6749, the official specification for the OAuth 2.0 authorization framework, "The client

    • CRM Email Template Align Left Instead of Center

      Is there a way to make a basic template align to the left instead of center? I know I'm likely forced to the 600px wide with the basic templates but I would REALLY like to set the email to the left instead of center. The basic templates make all the emails

    • Client Script - "Click' Button on Purchase Order - Specify "To Contact" or "To Supplier"

      The send email button is unique on the purchase order in that is has an additional submenu to send email "To Contact" or "To Supplier" It appears that the "click" event in Client script doesn't work correctly, probably because the button click didn't

    • Add Client Credentials Flow to Python SDK

      The Zoho CRM API supports a client credentials flow to automatically generate ephemeral access tokens, and this can be done programatically. The Python SDK however requires you to provide a grant token, refresh token, or access token when initializing

    • Conditional display of fields in Zoho Books Custom modules based on another field

      We're currently working with a Custom Module in Zoho Books and have a question about improving data entry efficiency and user experience. Our module includes a "Client Type" dropdown field, which determines the type of information to be collected. Each

    • Background Image for page in Zoho Creator

      Is it possible to use an image as the background in a page in Zoho Creator? I see it is possible to use an image as the background within a panel, but about about the page itself?

    • Next Page