Account hierarchy and proration calculation

Problem statement

This article explains how proration is calculated when subscriptions are linked in an account hierarchy setup.

Solution

When customers are linked in an account hierarchy, proration behaves differently depending on who paid for the original invoice and when the linkage was created.

Use case

1. Customer 1: Create a subscription for this customer and pay using Card 1.

2. Customer 2: Add a payment method for this customer, for example, Card 2.

3. Link the customers: Set Customer 1 as the child and Customer 2 as the parent.

4. Upgrade the subscription:

   • When Customer 1's subscription is upgraded, credits are not applied to the prorated invoice.

   • This is because the refund or credit must go to the customer who paid for the original invoice.

   • In this case, the invoice was paid by Customer 1 using Card 1.

5. Proration handling:

   • Customer 2 (the parent) will be charged the prorated amount resulting from the upgrade.

   • A credit note is created for Customer 1.

   • The credit remains as refundable credits at the Customer 1 level and can be refunded to Customer 1 from the dashboard by the merchant.

6. Subsequent upgrades:

   • Once the prorated invoice for the upgrade is paid by the parent (Customer 2), if another upgrade occurs, credits will now be applied to the new prorated invoice.

   • This is because Customer 2 paid for the entire invoice after the hierarchy was established.

In summary, this behavior occurs because the subscription was created and paid before linking the customer records. If the subscription is created and paid after linking the customers, the proration and credits will apply correctly within the hierarchy.