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

                                  • Option to Automatically Publish Job Openings to the Career Website via API or Workflow

                                    Currently, when creating Job Openings using the Zoho Recruit API, the records are successfully inserted into the system. However, there is no way to automatically publish these Job Openings to the Career Website. In the Job Opening field data, there are
                                  • Evaluate applicants faster: Profile Summary and Skill Sets now in Applications

                                    Evaluating applicants often requires switching between modules to understand their skills and background. With this update, we’ve extended two capabilities directly to the Applications module: Skill Sets and Profile Summary. You can now review applicants
                                  • Free webinar: How to use passkeys with Zoho Vault

                                    Hi everyone! Passkeys are transforming the way we sign in—making authentication safer, faster, and completely passwordless. No more memorizing complex passwords or worrying about credential theft. With Zoho Vault, you can securely manage both passwords
                                  • Adding Markdown text using Zoho Desk API into the Knowledge Base

                                    Hi Zoho Community members, We currently maintain the documentation of out company in its website. This documentation is written in markdown text format and we would like to add it in Zoho Knowledge Base. Do you know if there is REST API functionality
                                  • Is it possible to embed Zoho Bookmarks in the Cliq sidebar?

                                    Is there any way that each Zoho user can access their bookmarks (that live in https://bookmarks.zoho.eu/ which is technically a part of Zoho Mail) directly within Cliq? As a widget, or an item in the sidebar? My team does not use Mail, it uses Cliq all
                                  • Enhancing Zia's service with better contextual responses and article generation

                                    Hello everyone, We are enhancing Zia's Generative AI service to make your support experience smarter. Here's how: Increased accuracy with Qwen One of the key challenges in AI is delivering responses that are both contextually accurate and empathetic while
                                  • Let us add Lookup fields in the Blueprint Transitions

                                    We are unable to add Lookup Fields in the blueprint transitions in Zoho Desk, we wanted to make it a requirement for our workflow but since it's not available in the transition we cannot. The lookup field exists in the Layout: But it cannot be added/selected
                                  • How can we clear a signature field with deluge?

                                    I would like to clear a signature field in the Edit -> On Load. I have tried input.signature = ""; input.signature = null; clear input.signature; None of the above is working. is there any other way I am missing?
                                  • Online PDF Editor

                                    Hello Team, There is a small glitch i found when i was using your online software called "PDF Editor", There is a menu bar on right side comes when we click on 3 dots for any pdf, but that entire menu has no options to choose, that is totally blank, please
                                  • How do I disconnect my Salesforce integration?

                                    I need to integrate a different Salesforce sandbox with my Zoho form.
                                  • Zoho Recruit - Email Relay

                                    Good day, Has anyone succeeded in setting up an email relay for Office 365? If I add the details from https://support.microsoft.com/en-us/office/pop-imap-and-smtp-settings-8361e398-8af4-4e97-b147-6c6c4ac95353, I get the connection error. Regards, Eka
                                  • Zoho Recruit -> Exchange Online Relay

                                    HI! I have tried to connect Recruit to our MS 365 Exchange Online without any luck. I use this guide https://help.zoho.com/portal/en/kb/recruit/outreach/email-relay/articles/email-relay-zoho-recruit#Configuring_Email_Relay_Settings Do anyone have the
                                  • Error AS101 when adding new email alias

                                    Hi, I am trying to add apple@(mydomain).com The error AS101 is shown while I try to add the alias.
                                  • an issue in Zoho CRM where the workflow rule is not triggering

                                    H I’m currently facing an issue in Zoho CRM where the workflow rule is not triggering when a new lead is created through a webform. I’ve double-checked the criteria and field updates, everything seems fine but it still doesn’t fire. Has anyone faced this
                                  • 401 Unauthenticated Error – Zoho CRM to Google Sheets Integration

                                    Hi I'm building an Automation Function in Zoho CRM using Deluge that appends contact data from Zoho CRM into a Google Sheet whenever a new contact is created. WHAT I'VE DONE: I created a connection in Zoho CRM (Developer Hub → Connections) with the following
                                  • Power up your Kiosk Studio with Real-Time Data Capture, Client Scripts & More!

                                    Hello Everyone, We’re thrilled to announce a powerful set of enhancements to Kiosk Studio in Zoho CRM. These new updates give you more flexibility, faster record handling, and real-time data capture, making your Kiosk flows smarter and more efficient
                                  • Income not showing in direct bank feed

                                    Hi, I am trying to enter income without knowing or mentioning customer, as i am told, my client wants single or cash basis accounting but i seriously struggling......................
                                  • I am not able to check in and checkout in zoho people even location access allowed

                                    This issue i am facing in mackbook air m1, I allowed location in chrome browser and i also tried in safari but getting similar issue. Please have a look ASAP.
                                  • Preview future shift rotation in Shift Schedule

                                    Hi, What if, instead of the current behavior, the Shift Rotation feature in Zoho People allowed users to preview future shift schedules before the scheduler execution? Currently, when a shift rotation is configured (for example, monthly rotation), the
                                  • What do you get in Zoho ONE Free Trial?

                                    Zoho One is a collection of applications that work together to run a company's entire operations in the cloud. It includes more than 40 online applications and an equivalent number of mobile apps, all of which can be accessed with a single sign-on and
                                  • Automatically Update Ticket Status in Zoho Desk Based on Actions in Zoho Projects

                                    Hi Zoho Desk Team, Hope you’re doing well. We’re using the Zoho Desk–Zoho Projects integration to manage tasks related to customer tickets, and it works well for linking and tracking progress. However, there are a few important automation capabilities
                                  • Sign Out

                                    Hello, I have a doubt with Permalink. I have a view created with critera to show only the records belonging to the user who has sign in. The problem is that the different users use the same computer and some times the user login keep signed, and when I send the permalink (by email) of the view, the users enter with other login signed. Moreover the permalink view doesn�t allow to do a log out. May I add something in the permalink to request always sign in? Sorry for my English. Many thanks! Regards
                                  • Announcing new features in Trident for Windows (v.1.39.4.0)

                                    Hello Community! Trident for Windows just received a major update, with a range of capabilities that focuses on strengthening communication and simplifying workflows. Let’s dive into what’s new! Upload email attachments to WorkDrive. Until now, you could
                                  • Introducing Automatic Field Addition (Text Tags) in Zoho Sign

                                    Hello, Today we are excited to announce the general availability of automatic field addition (text tags) feature in Zoho Sign. Now, you can now add text tags in the content of your documents and Zoho Sign will automatically add the corresponding fields when they are uploaded for the signing process. For example: when you add text tags to your sales orders, new employee contracts, and NDAs, Zoho Sign will add the corresponding fields when these documents are uploaded for the signing process. If you
                                  • Introducing Built-in Telephony in Zoho Recruit

                                    We’re excited to introduce Built-in Telephony in Zoho Recruit, designed to make recruiter–candidate communication faster, simpler, and fully traceable. These capabilities help you reduce app switching, handle inbound calls efficiently, and keep every
                                  • Do not use isnull()

                                    Does not always return booleans. Can also return null. Never use this function. Just use var==null instead.
                                  • Write-Off multiple invoices and tax calculation

                                    Good evening, I have many invoices which are long overdue and I do not expect them to be paid. I believe I should write them off. I did some tests and I have some questions:  - I cannot find a way to write off several invoices together. How can I do that,
                                  • Splitting Transactions in Zoho Books

                                    I have read in past forum posts that the ability to split bank transactions would likely be implemented - it's definitely a typical accounting program feature.  I'm new to Zoho and thought I'd found nirvana until I realized this feature doesn't seem to
                                  • Statement Aging On Cutomer Statement

                                    Hello, Is it possible to put aging on customer statements? Current 1-30days 31-60days 61-90days 91-120days Over 120 days. See attached image from another accounting package. Many customers pay off a statement and clear older invoices.
                                  • Unveiling the next iteration of Ask Zia in Zoho CRM: An all-new chat interface, conversation history, actions, and much more

                                    Your CRM assistant just leveled up. Zoho CRM's Ask Zia functionality now offers a more conversational and context-aware experience to help you not just understand your data, but act on it—all from one chat window. With its redesigned interface and expanded
                                  • Response rate and time on social media

                                    Hello, I just want to know if it's possible to manage the response rate and response time from my social media on zoho social ? I don't see any statistical reports on the online scoreboard ? Thank you in advance for your response and sorry if the question has already been posted
                                  • Whatsapp BOT with CRM

                                    Hello, how do you use Whatsapp integrations in zoho CRM?
                                  • Ability to translate Zoho CRM Kiosks

                                    Hi team, Is support for translating kiosk text and screen names in the Zoho CRM translation tool planned on the roadmap? Thanks,
                                  • Whatsapp Limitation Questions

                                    Good day, I would like to find out about the functionality or possibility of all the below points within the Zoho/WhatsApp integration. Will WhatsApp buttons ever be possible in the future? Will WhatsApp Re-directs to different users be possible based
                                  • Editing the list of Categories in the Categorize Manually section of Banking in Zoho Books

                                    Hi, I need to create two new Categories called Withdrawals and Deposits to categorize payments in a bank account. How do I edit the Categories list?
                                  • Can I write a check in Zoho Books with no associated bill?

                                    This currently does not seem possible, and I have a client that desperately needs this function if I am able to convert them with Quickbooks. Thank you in advance for your reply. 
                                  • [Free Webinar] Intelligent document processing with Zoho RPA

                                    Hello everyone! Greetings from the Zoho RPA team! We're excited to invite you to our upcoming webinar on intelligent document processing with Zoho RPA, where we'll introduce powerful new capabilities designed to make your automation journey smarter, faster,
                                  • When I schedule calendar appointments in zoho and invite external emails, they do not receive invites

                                    Hello, We have recently transitioned to zoho and are having a problem with the calendar feature. When we schedule new calendar appointments in zoho the invite emails aren't being sent to the external users that we list in participants. However, this works
                                  • Zoho People > Performance Management > Appraisal cycle

                                    Hello All I am using this 2 users to test out how it work on Performance Management User 1 - Reportee User 2 - Reporting Manager : Li Ting Haley User 1 : Self Appraisal Error How do i fix this error?
                                  • Send emails directly via Cases module

                                    Greetings all, The ability to send emails from the Cases module, which users have been eagerly anticipating, is now available, just like in the other modules. In Zoho CRM, Cases is a module specifically designed for managing support tickets. If your organization
                                  • Next Page