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.

​

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! 

• Topic Participants

• Hari | Zoho Billing

  

• 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

• Approval Process Comments

  Is it possible to view the comments entered during the approval or rejection of a record in the approval process? If not, is there a way to require a field to be completed upon approval or rejection?

• Login for test case

  Had a few questions regarding authentication test cases and couldn't find an answer in the the docs. 1. If an app like Zoho Creator requires authentication before providing access, do I need to create a login function and add it to each test case? 2.

• Zoho / Outlook Calendar sync

  The current Marketplace -> Microsoft -> Meetings integration needs 2 changes. 1. The current language for the Two-Way sync option should be changed. It currently states, "Sync both your Zoho CRM Calendar and Office 365 Calendar meetings with each other."

• Please make it easier to Pause syncing

  right now it takes 3 clicks to get there. sounds silly, but can you make it just 2 clicks to get it done instead? thats how dropbox does it, 2 clicks to pause instead of 3.

• Customer members area

  Does FSM support a customer members area? If not what do you propose we use if we want the data used in FSM for customers to give them an area / login to see past orders, create new orders and general announcements.

• Zoho Books-Accounting on the Go Series!

  Dear users, Continuing in the spirit of our 'Function Fridays' series, where we've been sharing custom function scripts to automate your back office operations, we're thrilled to introduce our latest initiative – the 'Zoho Books-Accounting on the Go Series'.

• Desktop app doesn't support notecards created on Android

  Hi, Does anybody have same problem? Some of last notecards created on Android app (v. 6.6) doesn't show in desktop app (v. 3.5.5). I see these note cards but whith they appear with exclamation mark in yellow triangle (see screenshot) and when I try to

• Notes created in mobile can no longer be accessed in desktop

  Working with a 2013 Mac running OS 10.14.6; Desktop Notebook version 4.5.3. Using Motorola Moto G Power 5G - 2024; Android app version 6.7 I have been using Notebook for some years. Starting several weeks ago, the notes newly created ion the phone can

• Function #49: Manage varying installment payments using Zoho Books

  . Hello everyone, and welcome back to our series! Last week, we discussed automating the collection of fixed installment payments in Zoho Books. But what if your payment structure involves charging varying percentages of the invoice total as installments?

• Open Sans Font in Zoho Books is not Open Sans.

  Font choice in customising PDF Templates is very limited, we cannot upload custom fonts, and to make things worse, the font names are not accurate. I selected Open Sans, and thought the system was bugging, but no, Open Sans is not Open Sans. The real

• Zoho Writer - Option to Export as .zdoc format

  I've noticed that it's not possible to export a Zoho Writer Document in the .zdoc format. Isn't zdoc, Zoho Writer's own format? My use case is that I sometimes need to create quite complex documents with floating elements, which sometimes need to become

• Is it possible for contacts to "Re-enter" a workflow in Zoho Campaign?

  We are currently working on a way to automatically add users to from one list to other lists based on specific criteria, but can't seem to find a native way of doing this so we are trying to use Workflows to do this. So, for example, if a user's status is set to "Active," then they should be added to the list "Active Users." If the same user's status is then set to "Paused," they should be added to the list "Paused Users" and removed from the list "Active Users." This works fine for the first go

• Bulk upload images and specifications to products

  Hi, Many users have asked this over the years and I am also asking the same. Is there any way in which we can bulk upload product (variant) images and product specifications. The current way to upload/select image for every variant is too cumbersome.

• Out of Office for Just One of My Alias Email

  Can I set up the Out of Office Reply for Just One of my Alias Email Addresses?

• Can I map multiple Surveys into the CRM using the same fields?

  Hello, We are a healthcare practice that offers two distinct services (Nutrition and Primary Care). We use Zoho Survey for our lead generation form (Get Started Survey), which allows people to express interest in one of the two services and even allows

• Dealing with API responses where integers have more than 16 digits

  Hi there How do I deal with an api response contaning an int or float with more than 16 digits (before any decimal places for a float). I constantly receive the response "Unable to cast the 'BigInteger' value into a 'BIGINT' value because the input is

• To Zoho customers and partners: how do you use Linked Workspaces?

  Hello, I'm exploring how we can set up and use Linked Workspaces and would like to hear from customers and partners about your use cases and experience with them. I have a Zoho ticket open, because my workspace creation fails. In the meantime, how is

• Can't change form's original name in URL

  Hi all, I have been duplicating + editing forms for jobs regarding the same department to maintain formatting + styling. The issue I've not run into is because I've duplicated it from an existing form, the URL doesn't seem to want to update with the new

• Need Inactive accounts to be visible in Reports in Zoho Books

  I N=need Inactive accounts to be visible in Reports in Zoho Books to do recons of the accounts but when i see the same they are not visible in the Accountant - Account Transactions report

• unblock e-mail

  please unblock my e-mails info@meatnews.gr and myrtokaterini@meatnews.gr

• Add Zoho Mail for users who do not need Zoho One

  We have licenses for ZOho One for teams that need to use the suite of products that Zoho One offers.  We have 8 more people who only need email access and we would like to add just a Zoho Mail.  They do not need the Zoho One license.  We are currently

• Zoho Projects - Q2 Updates | 2025

  Hello Users, With this year's second quarter behind us, Zoho Projects is marching towards expanding its usability with a user-centered, more collaborative, customizable, and automated attribute. But before we chart out plans for what’s next, it’s worth

• ZML vs HTML Snippet - which is better?

  Are there certain use cases where one is better than the other?

• Auto CheckOut Based On Shift.

  This Deluge script runs on a scheduled basis to automatically set the 'Actual_Check_Out' time for employees who haven't manually checked out. If the current time is past their scheduled 'Shift_End_Time', the script updates the check-out time to match

• How to remove some users in zoho accounts

  How to remove some users in Zoho accounts.

• Infinite loop of account verification

  Hi I can't do anything on my zoho account.  I always get this message Hi Sheriffo Ceesay As a security measure, you need to link your phone number with this account and verify it to proceed further. When ever I supply the details, it displays that the number is associated with another account. I don't have any other account on zoho so this is really annoying. 

• Load PO_Date field (Purchase Order) with current date in Deluge

  Hi, I'm not a full time developer, just helping to customize our CRM, in the small company I work for. There must be something wrong with me, because I can't do something so simple as complete a field with the current date in a function using Deluge.

• Zoho CRM in Microsoft Power Automate Custom Connector

  Hi everyone, I’m building a Power Automate flow that integrates Microsoft Bookings with Zoho CRM. The goal is to automatically create a meeting (event) in Zoho CRM whenever a new appointment is booked via Microsoft Bookings. To achieve this, I created

• Spell check sucks

  Come on guys, it's 2024 and your spell check is completely retarded. You gotta fix it.

• How to include total km for multiple trips in expense report.

  Whenever I create a mileage report it only shows the total dollar amount to be reimbursed. The mileage for each individual trip is included but I also need to see the total distance for all trips in a report? How do I do this?

• Outgoing blocked: Unusual activity detected.

  I just made payment for my Zohomail Today and have been debited so i will like to be Unblocked because this is what it says (Outgoing blocked: Unusual activity detected) Thank you i await your swift responses

• Zoho One Login Issue - Unable to receive OTP

  Hi Support Team, I am experiencing a unique login issue with Zoho One. I am attempting to log in from India using Zoho Login credentials provided by a USA-based client. Their Zoho account is hosted on a US data center. After entering the username and

• Question Regarding Managing Sale Items in Zoho Books

  Good day, I was wondering about something. Right now, Zoho Books doesn’t seem to have a way to flag certain items as being on sale. For example, if I want a list of specific items to be on sale from October 1 to October 12, the user would have to export

• In the Zoho Creator Customer Payment form i Have customer field on select of the field Data want to fetch from the invoice from based on the customer name In the Customer Payment form i Have subf

  In the Zoho Creator Customer Payment form i Have customer field on select of the field Data want to fetch from the invoice from based on the customer name In the Customer Payment form i Have subform update Invoice , there i have date field,Invoice number

• Problem of Import Client Users From CRM and or Expense

  I am premium plan user on Projects. I have about 500 customers on Expense and CRM that integrated with each other. According to at below link, I am trying to import clients from CRM, system not allowed to select any customer. If I import from Expense,

• Unable to see free plan option

  Hello Zoho Support Team, I hope you are doing well. I am trying to sign up for Zoho Mail, but I am unable to see the option for the free plan. Could you please guide me on how I can access or activate the free plan? Thank you for your assistance.

• unblock my zoho mail account. outlines@zoho.com

  please unblock my zoho mail account, outlines@zoho.com

• domain not verified error

  Hi when i try to upload a video from zoho creator widget to zoho work drive iam getting domain not verified error.I don't know what to do .In zoho api console this is my home page url https://creatorapp.zoho.com/ and this is my redirect url:www.google.com.Iam

• equest to Disassociate Bigin from Zoho One and Migrate to Standalone (Upgrade to Bigin Premier – 3 Seats, Annual)

  Dear Zoho One Support Team, I’m writing to request your assistance to disassociate (remove) the Bigin application from our Zoho One organization while preserving all existing Bigin data. After the disconnection is successfully completed, we intend to

• SMTP email sending problem

  Hello, I've sent emails before, but you haven't responded. Please respond. My work is being disrupted. I can't send emails via SMTP. Initially, there were no problems, but now I'm constantly receiving 550 bounce errors. I can't use the service I paid

• Next Page