A recurring addon, when applied to a subscription, stays attached for as many billing cycles the subscription runs. Of course, it can be removed at any time. However, if you only want the addon to stay attached to the subscription for a fixed number of billing cycles, you can set the addon billing cycle parameter for the addon while creating or updating a subscription.
Consider that a customer is to be subscribed to a plan (Plan A) with a billing period of 6 months for $600. Now consider an addon of period 2 months for $20. This addon period fits into the plan billing period 6 ÷ 2 or 3 times. So when the addon is attached to a subscription for plan A, the price of the addon for one subscription billing cycle is 3 x $20 = $60. So the first invoice amount becomes $600+$60 = $660. Now if the billing cycle for this addon, in this subscription is set to 1, the addon is not charged from the next billing cycle of the subscription. In other words, the next invoice after 6 months is $600.
This feature also comes in handy when you want to break down a one-time charge so the customer can pay in parts.
First step is to set up an addon.
After navigating to Product Catalog > Addons, you can either create a new recurring addon with the charge or modify an existing addon for that purpose. Once the addon is set up, you need to link it to a new subscription or an existing subscription.
To add the addon to a new subscription, navigate to Subscriptions and click on Create New Subscription. Click Add Recurring Addon. Here you choose the addon and mention the billing cycle as well.
The addon will be added to the invoice of the new subscription. As the term progresses and more invoices are generated for each billing cycle, the billing cycle will decrement to become zero and the addon will be removed after.
To add the addon to an existing subscription, locate the subscription and click Edit Subscription.
Then click on the edit icon for an addon to change the number of billing cycles for.
For the existing subscriptions, when an addon is added, a prorated invoice is generated based on the subscription term. The prorated period will be considered as one billing cycle as far as the add-on is concerned. If you add a billing cycle to an existing addon linked to a subscription, no charge will be raised. However, the billing cycles for the addon against the subscription will be increased by 1.
If there is a change of term for the subscription (for example, you change the subscription from monthly to quarterly) and the change is done via API, ensure that the billing cycle of the addon is passed as well. If not, the billing cycle of the addon will be reset to ‘forever', i.e., the customer will be charged for the addon indefinitely.
When a subscription is canceled, the addon linked to the subscription will be disabled till reactivation. There are two scenarios to be taken into account as far as the reactivation of the subscription is considered:
1. In-term Reactivation: If the subscription is reactivated before the end of the subscription term, the billing cycles of the addons will be maintained.
2. Out-of-term Reactivation: If the subscription is reactivated after the end of the subscription term, the billing cycle of the addon will be reset to ‘forever', i.e., the customer will be charged for the addon indefinitely. Using Change Subscription option, you can update the billing cycle of the addon after reactivation.
1. How do I collect one-time charges/setup fee in parts?
You can use billing cycle for addons to collect the setup fee in parts.
Say, you're charging your customers a setup fee of $1000 and you want to let them pay in 10 installments then the billing cycle should be set as 10. You can configure an addon with 'Unit Price' set as $100 and 'Billing Cycles' as 10.
However, the setup fee modeled as an addon, will be considered in the MRR calculation(setup fee defined in the plan is not considered for the MRR).
2. Can I raise an advance invoice for addons that have a billing cycle?
Yes, you can raise an advance invoice to the collect payments for addons with billing cycles.