Proration calculation logic

Problem Statement

This article helps you understand proration calculation logic.

Solution

Scope

How Proration is calculated when a sub is upgraded/downgraded?

Formula to calculate proration.

Calculate Proration when calendar billing is ON

Is there a default setting for proration?

Summary

Proration is calculated in two types: day-based and milli-second based. To enable proration, head to Settings > Configure Chargebee > Billing LogIQ and check the "Enable Proration" checkbox.

Then you can manage the proration settings from Billing Mode.

The Formula to calculate proration : (Prorated Term / Regular Term) * Plan Amount (OR) (Plan Amount / Regular Term) * Prorated Term

We have migrated to new Self-Serve Calendar Billing configuration from 23 March 2023. Self-Serve Calendar Billing allows you to add multiple Site-level & Plan-level configurations also supports Yearly billing frequency. With this new configuration, you can manage both SaaS and E-Commerce business. Besides, the Advance trigger allows you to set calendar billing for specific events. Reach out to our support to enable this feature on your site.
Refer to this link on how to configure Self-Serve Calendar Billing for SaaS business
Refer to this link on how to configure Self-Serve Calendar Billing for E-Commerce business

Solution

Use-case: Calendar billing is set to 1st to every month and prorate immediately. Now I start a sub with 649$ on 31st JAN . Now my renewal will be 1st of FEB. So my first invoice generated will be prorated. the prorated amount for 1 day is accounting to 23.18$

The Formula to calculate proration : (Prorated Term / Regular Term) * Plan Amount (OR) (Plan Amount / Regular Term) * Prorated Term

Now according to the above formula if we calculate the above use case then -

In this case, the prorated term is Jan 31st to Feb 1st. Internally, we calculate the per-day amount by converting that to a regular term which is Jan 31st to Feb 28th. The number of days between Jan 31st to Feb 28th is 28 so 649/28 = 23.1785.

The per-day amount is then multiplied by the number of days in the prorated term which is 1 day in this case. So the final amount charged was $23.18.