Examples of canceling a subscription and refunding the end customers automatically
The section includes examples of canceling a subscription with different refunds but the same calculated credit memo.
The following subscription will be used in the examples:
- Subscription Term Type: Termed
- Charge: 1 monthly recurring charge of 100 USD
- Contract Effective Date: 2022-12-01
For simplification, the following table only lists information on the first two billing periods of the subscription.
| Billing period | Billing period start date | Billing period end date | Payment |
|---|---|---|---|
| 1st | 12/01/2022 | 12/31/2022 | $100 |
| 2nd | 01/01/2022 | 1/31/2022 | $100 |
| Cancel Effective Date | Specific Date: 01/09/2022 | Calculated credit memo: $74.2 |
An end customer requests you (the merchant) to cancel the subscription by specifying the cancellation effective date as 01/09/2022, which only affects the 2nd billing period and payment. A credit memo is calculated based on the specified cancellation effective date. That is, counting from 01/09/2022, 23 out of 31 days do not need to be paid, and thus $74.2 is calculated as a credit memo.
You may specify different refund amounts based on the business policy and the calculated credit memo in different situations.
Example 1: Refund amount equals calculated credit memo
The following table shows an example in which you specify a refund of $74.2, the same as the calculated credit memo.
| Your setting | Refund | $74.2 | ||
|---|---|---|---|---|
| Zuora processed result | Payment | $100 | Applied amount | $25.8 |
| Credit Memo | $74.2 | Unapplied amount | $0 | |
| Invoice (01/01/2022 ~ 1/31/2022) | $100 | Balance | $0 |
The result is: the refund of $74.2 is unapplied from the original payment of $100, so the payment applied amount to the invoice becomes $25.8. Then the credit memo of $74.2 is fully applied to the invoice. As a result, the invoice balance is 0.
Example 2: Refund amount less than calculated credit memo
In this example, based on the business policy, you have decided to refund $40.0 to the end customer. The following table shows that you specify this refund of $40.0, less than the calculated credit memo of $74.2.
| Your setting | Refund | $40 | ||
|---|---|---|---|---|
| Zuora processed result | Payment | $100 | Applied amount | $60 |
| Credit Memo | $74.2 | Unapplied amount | $34.2 | |
| Invoice (01/01/2022 ~ 1/31/2022) | $100 | Balance | $0 |
The result is: the refund of $40.0 is unapplied from the original payment of $100, so the payment amount applied to the invoice becomes $60. To keep the invoice balance to 0, $40 out of the $74.2 credit memo is applied to the invoice. The remaining unapplied credit amount is $34.2.
Example 3: Refund amount greater than calculated credit memo
In this example, based on the business policy, you have decided to refund $100.0 to the end customer. Among the $100 refund, $74.2 is for the unconsumed subscription period, and $25.8 is for the compensation to the end customer agreed upon between you and the end customer.
The following table shows that you specify this refund of $100, greater than the calculated credit memo of $74.2, and choose to write off the outstanding balance of the invoice.
| Your setting | Refund | $100 | ||
|---|---|---|---|---|
| Zuora processed result | Payment | $100 | Applied amount | $0 |
| Credit Memo 1 | $74.2 | Unapplied amount | $0 | |
| Credit Memo 2 | $25.8 | Unapplied amount | $0 | |
| Invoice (01/01/2022 ~ 1/31/2022) | $100 | Balance | $0 |
The result is: the refund of $100 is unapplied from the original payment of $100, so the payment amount applied to the invoice becomes $0. Besides credit memo 1 of $74.2 for the unconsumed subscription period, credit memo 2 of $25.8 to write off the outstanding balance of the invoice is also automatically generated and applied to the invoice.