Zuora allows you to prorate the credit issued back to a customer. This article explains how your billing rules affect the amount of prorated credit issued.
There are situations where a credit needs to be issued back to a customer who has paid for a service period in advance. For instance, if a customer cancels a subscription early or removes a product from their subscription, you can choose to issue a credit for the unused service period.
For example, imagine a scenario where:
- the bill cycle day of the subscription rate plan charge is set as Default from Customer Account
- the bill cycle day of the account is set as 1st of the month
- the subscription billing trigger date is 10/1/2014
- the billing period of the rate plan is set to quarterly
- the rate plan is set to align to subscription or align to term such that the first full quarter period is 10/1/2014 to 12/31/2014
- the subscription is canceled early on 10/15/2014
The amount of prorated credit issued depend on the combination of the Prorate recurring charges for partial period? and Bill recurring charges for partial month (with monthly based billing periods)? settings, as specified in Billing > Define Billing Rules. In all cases the first invoice charges for the full quarterly service period from the subscription trigger date to the bill cycle day , 10/1/2014 – 12/31/2014 :
Prorate for Partial Month and Partial Period
Bill recurring charges for partial month (with monthly based billing periods)? = Yes, Prorate recurring charges for partial period? = Yes
The invoice shows a prorated credit for the partial month and partial period. In this scenario, the next invoice would show a credit for the period 10/15/2014 – 12/31/2014.
Prorate for Partial Period
Bill recurring charges for partial month (with monthly based billing periods)? = No, Prorate recurring charges for partial period? = Yes
The invoice only shows a prorated credit any full months in the partial period. In this scenario, the next invoice would show a credit for the period 11/1/2014 – 12/31/2014.
Do no prorate
Bill recurring charges for partial month (with monthly based billing periods)? = No, Prorate recurring charges for partial period? = No
No prorated credit is issued.
Note: It is not possible to set Bill recurring charges for partial month (with monthly based billing periods)? to Yes and Prorate recurring charges for partial period? to No, as this is an invalid combination.
Proration Credit on Invoices
When credit is issued due to proration the words “-- Proration Credit” are appended to the end of the charge name on the invoice, and the charge amount is displayed as a negative value in red.
To illustrate, this first invoice shows a charge to the customer for the service period of 4/1/2011 - 4/30/2011:
The customer cancels their subscription early, on 4/15/2011, so the next invoice shows a credit to the customer for the partial month of 4/15/2011 - 4/30/2011:
Credit for Prorated Discounts
This feature is in Limited Availability. If you require access to the feature, submit a request at Zuora Global Support so that we can evaluate your use case.
Currently, Zuora supports the Credit for Prorated Discounts feature to issue the credit back to customers pro rata between the original charge and the fixed-amount discount.
If the Credit for Prorated Discount feature is enabled, Zuora will prorate discounts when issuing the credit back to the customer that simultaneously cancels the regular rate plan charge and the corresponding fixed-amount discount charge.
If the Credit for Prorated Discount feature is disabled, Zuora will apply as much of the credit as possible towards original net payable amount (the original charge amount minus the fixed discount).
If both the Invoice Settlement feature and the Credit for Prorated Discounts feature are enabled, proration issues occur in the following scenario: removing a discount charge from a subscription first, and later removing or canceling the regular charge that the discount charge is applied to.
For more information about how this feature is implemented, see Fixed-Amount Discount.
If you have the Credit for Prorated Discount feature enabled, ensure that it only applies to the scenarios where all the following conditions are met:
- One fixed-amount discount charge only applies to one regular charge instead of multiple regular charges.
- No other discount charges are applied to the same regular charge.
- The discount charge and the applied-to regular charge are in the same product rate plan.
- The discount charge and the applied-to regular charge has the same bill cycle day, and the bill cycle day never changes.
- The discount charge has the same activation or cancelation date as other regular charges in the same product rate plan.
- The amount of the applied-to regular charge is always greater than the amount of the discount charge.
- Suspend and Resume amendments are not used.
- Amendments are never deleted if any.
- Update Product amendments only occur at the end of a billing cycle if any.
What causes the feature implementation to fail include the following operations:
- Deleting an amendment to the discount charge, the applied-to regular charge, or both.
- Canceling the credit-back billing documents including invoices and credit memos, and then generating billing documents again later.
- Crediting back for the fixed amount discount charge and reapplying it to other regular charges more than once.
- Creating Suspend or Resume amendments to the discount charge, the applied-to regular charge, or both.
- Removing the product or canceling the related subscription, which causes that the end date of the discount charge is different from the end date of the applied-to regular charge.
- The bill cycle day change and amendments occur in the same billing cycle.
- Compounding percentage and fixed-amount discounts to apply to the same regular charge by using discount classes.