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Examples of canceling a subscription and refunding the end customers automatically

Zuora

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.