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 transparentBut 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! 



      Zoho Campaigns Resources


        • Desk Community Learning Series


        • Digest


        • Functions


        • Meetups


        • Kbase


        • Resources


        • Glossary


        • Desk Marketplace


        • MVP Corner


        • Word of the Day


        • Ask the Experts


          • 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

          Zoho CRM Plus Resources

            Zoho Books Resources


              Zoho Subscriptions Resources

                Zoho Projects Resources


                  Zoho Sprints Resources


                    Zoho Orchestly Resources


                      Zoho Creator Resources


                        Zoho WorkDrive Resources



                          Zoho CRM Resources

                          • CRM Community Learning Series

                            CRM Community Learning Series


                          • Tips

                            Tips

                          • Functions

                            Functions

                          • Meetups

                            Meetups

                          • Kbase

                            Kbase

                          • Resources

                            Resources

                          • Digest

                            Digest

                          • CRM Marketplace

                            CRM Marketplace

                          • MVP Corner

                            MVP Corner




                            Zoho Writer Writer

                            Get Started. Write Away!

                            Writer is a powerful online word processor, designed for collaborative work.

                              Zoho CRM コンテンツ




                                ご検討中の方

                                  • Recent Topics

                                  • Zohomail does not support additional fields in mailto links

                                    Hello, I set up Zohomail as default composer in Firefox according to manual here: https://www.zoho.com/mail/help/defaultcomposer.html#alink2 Later, I wanted to use this functionality to answer in a Linux mailing list thread using mailto link: mailto:xxxxx@kernel.org?In-Reply-To=%3C727o0521-q24p-s0qq-66n0-sn436rpqqr1p@example.com%3E&Cc=xxxxx%example.org&Subject=Re%3A%20%5BPATCH%20v2%28%29
                                  • Email address for forwarding is not saving and there's no confirmation ema

                                    Steps to reproduce: 1. Enter my forward email in the email forward section of the account 2. Click save 3. See a notification stating saved successfully 4. Refresh the page, no forward email is saved 5. No email confirmation received at the forwarding
                                  • This domain is not allowed to add in Zoho. Please contact support-as@zohocorp.com for further details

                                    This is the error i keep getting when trying to use my Zoho Domain Mail. This domain is not allowed to add in Zoho. Please contact support-as@zohocorp.com for further details Find attached. I hope this can be resolved very quickly so i can go on and make
                                  • Auto CC - Moving Departments

                                    We have Auto CC e-mail replies to your support mailbox enabled. We have two departments: Helpdesk (helpdesk@domain.com) Delivery (delivery@domain.com) If we create a Helpdesk ticket, and reply, replies are CC'd to helpdesk@domain.com (OK) We then move
                                  • 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.
                                  • Sorten the domain of zoho mail ids

                                    I recently created zoho mail id and am quite excited with the features. But one issue ig nobody wanna type this big zohoaccounts.com I mean silly bold Suggestion zmail.com (sound gmail) (attraction) or some genz words looks cool
                                  • Weekly Tips : Customize your Zoho Mail Notifications

                                    In a professional context, email communication remains one of the most crucial channels for staying connected and managing workflows. Keeping track of your emails, task updates, or important announcements can be overwhelming—especially if you are juggling
                                  • The attendees will now be redirected to the landing webpage when they exit the webinar, set by the organizer.

                                    Hello All, In the latest version of the Zoho Meeting iOS mobile app (v1.3.16), we have brought in the below enhancements:   Post Webinar Re-direction Revamped exit UI for Webinar Post Webinar Re-direction:  The attendees will now be redirected to the
                                  • 550-5.1.1 The email account that you tried to reach does not exist

                                    Hi, I made sure my domain, SPF, MX records, and DKIM are all verified. I've entered the information correctly in cPanel and Email Routing is set to Remote Mail Exchanger. I am able to send, but unable to receive emails. When I sent a test reply to it, I get the following error: The response was: 550-5.1.1 The email account that you tried to reach does not exist. Please try 550-5.1.1 double-checking the recipient's email address for typos or 550-5.1.1 unnecessary spaces. Learn more at 550 5.1.1 https://support.google.com/mail/?p=NoSuchUser
                                  • Download API file contents from browser

                                    Hi Team - is there something being planned to be able to trigger file downloads from the browser via a deluge script? i.e. retrieve a file via API, trigger the file download directly from the browser. Or... using the convertToPdf function (https://www.zoho.com/deluge/help/functions/file/convert-to-pdf.html)
                                  • When using "locations" in zoho books, can you keep the two locations totally separate from each other?

                                    I am looking to add a location but I don't want to intermingle the banking or other accounts. I want that to be like two separate independent branches that use different banking accounts, accounts payable, and accounts receivable. The people who are in
                                  • Adding a Channel to SalesIQ

                                    I have a client that currently uses Zoho CRM and Zoho Desk. They would like a live chat to place on their website that has a mobile app and chat bots (something like SalesIQ). However, they would also like to have all this work over SMS as well. Does the SalesIQ API allow this? Can I add visitors without them being a visitor on a website? Thanks! Bryan Redeagle
                                  • Zoho Flow Needs to Embrace AI Agent Protocols to Stay Competitive

                                    Zoho Flow has long been a reliable platform for automating workflows and integrating various applications. However, in the rapidly evolving landscape of AI-driven automation, it risks falling behind competitors like n8n, which are pioneering advancements
                                  • Important Features Missing

                                    Hey all I love linkthread, but i am missing some important features. I want to be able to include my Google Tag Manager. I have all the important stuff in my GTM Container: Facebook Pixel, LinkIn Pixel, Zoho Pagesense and so on. So i am able to do retargeting
                                  • Zoho SignForms: Prefill parameters with spaces render as “+” in the document (even when using %20)

                                    Hello Zoho Sign team, we are using SignForms with prefill parameters passed via URL. Spaces in parameter values are being rendered as “+” in the finalized document—even when we URL-encode spaces as %20. This is critical for us because we prefill addresses
                                  • Currency selector (based on variable) usage in comparsion

                                    Hi, I've developed a currency selector based on the following topic, and it's working well in pivot tables and charts: https://help.zoho.com/portal/en/community/topic/how-can-i-allow-my-users-to-choose-a-currency-for-the-dashboard I also have a comparison
                                  • Customize Column in Projects - Default View for Template?

                                    Is there a way to have the columns you'd like to see added to a template? I want my customized columns to show up every single time I create a project from that template. It appears I can customize them in the template but when I create the project they do not transfer over.  Template: See below how the columns in order are : Task, Owner, Status, Assigned, Website URL, Blog H1..etc. When I create a project from that same template it comes out as: Task, Owner, Status, Tags, Start Date, End Date, etc
                                  • Ask the Experts 24: Analytics, data administration, and mobile experience with Zoho Desk

                                    Hello Everyone! Welcome back to the Ask the Experts(ATE) series! We were so focused on our Autumn 2025 release that we didn't host an ATE session last month. In this month's ATE, we'd like to expand our areas for discussion: we'd like to listen to your
                                  • Multi-Page Forms in Zoho Creator!

                                    Let’s make long applications easier to handle by dividing them into pages, adding a progress bar, and guiding users step by step through complex data entry. This would be a total game-changer for the user experience and could significantly boost completion
                                  • Email login error

                                    Login successfully but email page error
                                  • Shared Mailboxes Disappeared

                                    Zoho Mail users in our company haven't been able to see their Shared Mailboxes for the past few hours. I've checked with App and Web Access, but they can't access them. When I send emails to their addresses, I get no error messages. They're still visible
                                  • Remote Server is misconfigured

                                    Dear Team, I am unable to use email id as remote server is misconfigured. It would be really great if you could help on this and get this resolved. Thanks & Regard Rohit Gupta
                                  • why cant i access my email account. it keeps asking me for reverifiying my account by entering my password.

                                    I cant access my account. it keeps asking me for reverifcaton by entering my password. once its entered it asks for it over and over.
                                  • Free webinar alert on October 16 - Less Complexity, More Security: Workplace + Directory

                                    Hello Zoho Workplace Community! Security and productivity shouldn't be at odds—and with Zoho, they're not. Discover how Zoho Workplace + Directory delivers seamless collaboration with enterprise-grade security, all in one integrated ecosystem. Join our
                                  • Workdrive and ChatGPT Team Synced Connectors

                                    Hi, we want to be able to integrate Zoho Workdrive with OpenAI’s ChatGPT Team plan. Google Drive and OneDrive both offer this, zoho please catch up asap. We dont want to have to put our company files in google drive, we want to allow chatgpt Team edition
                                  • Alias Name (on items) use case in Zoho inventory

                                    Hey, Hope everyone is well. Wondering if anyone can shed some light on the use case of Alias Names on Products in Zoho Inventory? Cheers, Chris
                                  • Updating an Invoice Line Item's Discount Account via API Call / Deluge Custom Function

                                    I need help updating an invoice line item's discount account via API. Below is a screenshot of the line item field I am referring to. Now the field to the left of the highlighted field (discount account) is the sales income account. I am able to modify
                                  • Send e-mail with attachments

                                    Dear Zoho, How is that possible in Zoho Flow to send an e-mail with attachment?  Just a simple example: Zoho Flow checks my Zoho mails and if the conditions starts the trigger then I would like to send an email with the original email's attachment. Any idea? BR, Adam
                                  • How to I get checkboxes on a subform to update via deluge

                                    Hello, would someone be able to tell me what I'm doing wrong here? I am trying to take the contents of a Deals subform and add them to an invoice then update the checkbox on each row so that 'add to invoice' is unticked and 'invoiced' is ticked. The output
                                  • Unified customer portal login

                                    As I'm a Zoho One subscriber I can provide my customers with portal access to many of the Zoho apps. However, the customer must have a separate login for each app, which may be difficult for them to manage and frustrating as all they understand is that
                                  • Zoho Projects - Task Owner filter at Project level

                                    Hi Projects Team, The feature requests I would like to raise is the ability to create a custom view at the project level for projects with tasks owned by a user or users. For example "Ashley's Projects" custom view might contain a list of project in which
                                  • Cadences

                                    I have just started using Cadences for follow-up up email pipeline. Is it just me or do you find the functionality very basic? For example, it will tell me (if I go looking for it) if someone has replied to a follow-up and been unenrolled; but it won't
                                  • Custom Fonts in Zoho CRM Template Builder

                                    Hi, I am currently creating a new template for our quotes using the Zoho CRM template builder. However, I noticed that there is no option to add custom fonts to the template builder. It would greatly enhance the flexibility and branding capabilities if
                                  • Would be really awesome to have Created Time and Modified Time showing for custom functions list

                                    It would be SO HELPFUL to be able to sort custom functions by created time/ modified time. Also seeing a created by/ modified by with the little profile picture would be supremely helpful as well. Just really hard sometimes to find a function you were
                                  • Ticket Export Does Not Include Ticket Threads

                                    Dear Zoho Desk Support Team, I hope you’re doing well. I would like to report an issue regarding the ticket export functionality in Zoho Desk. Currently, when exporting tickets, the ticket threads or conversation history are not included — only the ticket
                                  • Payments made notification

                                    This is a really wonderful feature but we can only use it for about 50% of payments made & have to revert to sending statements which is a real chore. Credits applied to the bills paid in the notification aren't included & this causes great confusion in the accounts receivable departments. Please, please add this required feature asap ! .....
                                  • Ability to add VAT to Retainer Invoices

                                    Hello, I've had a telephone conversation a month ago with Dinesh on this topic and my request to allow for the addition of VAT on Retainer Invoices.  It's currently not possible to add VAT to Retainer Invoices and it was mutually agreed that there is absolutely no reason why there shouldn't be, especially as TAX LAW makes VAT mandatory on each invoice in Europe!   So basically, what i'm saying is that if you don't allow us to add VAT to Retainer Invoices, than the whole Retainer Invoices becomes
                                  • ZOHO DESK link with Power BI

                                    HI, I am using ZOHO Desk for last two years and now my client is asking to integrate ZOHO desk data to Power BI so that they can use Data for reporting. Kindly guide in details so that i can give access to ZOHO desk export data for more visibility.
                                  • URLs being masked despite disabling tracking

                                    Hey, We had disabled click tracking from an email update we are sharing with our users. Despite this, the URL the end user is receiving is masked, and looks like "https://qksyl-cmpzourl.maillist-manage.net/click/1d8e72714515cda6/1d8e72714515ca70" instead
                                  • Dashboard Autorefesh

                                    Good day, I am a dashboard that displays the number of tickets based on "Product Name". This dashboard is displayed on a big TV for the team to monitor. Can the dashboard auto-refresh every few minutes to display the new values? Currently, we have closed
                                  • Next Page