Pro-ration logic in subscriptions

Problem Statement

This article helps you understand pro-ration logic in subscriptions.

Scope

Pro-ration logic in subscriptions

Solution The Proration feature in Chargebee helps calculate the adjusted amount for a subscription when it is changed in the middle of a billing term. This feature is primarily useful for SaaS businesses, where billing is done based on the time for which a service is used. If you have an E-Commerce business, you could simply disable Proration on your site.

To enable/disable proration, head to Settings > Configure Chargebee > Billing LogIQ and check the "Enable Proration" checkbox.

In Chargebee, an invoice is generated at the beginning of a billing term (Advance Billing). If a customer chooses to upgrade or downgrade their subscription during the middle of a month, the remaining amount for the existing plan should be credited and the new plan amount for the remaining period should be charged.

For example:

Assume that a subscription is created on a monthly Plan A for $30 on 1st Nov. The Subscription is changed(Upgraded) to Plan B for $100 on 15th Nov.

Credits issues from Plan A for the unused term = *($30/30)15 = $15

Charges for the new Plan B for the remaining term = *($100/30)15 = $50

New Invoice amount = $50

Amount to be charged = $50-$15(Credits) = $35

Renewal amount(Plan B) = $100

Note:

1. Chargebee prorates charges to the second.

2. The same proration logic is applied to recurring add-ons linked with the subscription.

3. Non-recurring add-ons are not prorated.