Zuora supports on-demand usage rating for usage charges that use a per unit or tiered charge model. This feature supports flexible usage rating schedules by allowing multiple rating opportunities in a billing period. Rating usage more frequently allows customers to keep track how much usage has already been incurred, while allowing you (the vendor) to charge immediately after usage consumed.
Configuring On-Demand Usage Rating
Zuora gives you the option to specify whether a usage charge should be billed on-demand or at the end of the usage charge’s billing period. Rating for usage occurs when a bill run is executed, and rating is the processing of charges to determine the cost of the usage.
Zuora's usage rating process has always followed a rating schedule that is tied to the billing period defined in the usage charge. The scheduler waits until the end of the usage charge's billing period before it picks up and rates the usage for billing. For example, a customer with a bill cycle day set to the 1st of the month can be billed for April’s monthly usage charge on May 1st.
To use this rating option, go to the product catalog charge, and under Timing of Charge, select the Usage Records Rating Option called
End of Billing Period.
The on-demand usage records rating option allows you to bill for usage immediately after it is uploaded into Zuora, rather than waiting until the usage charge’s billing period has passed. The uploaded usage gets picked up in the next billing run. To use this rating option, go to the product catalog charge and under Timing of Charge, select the Usage Records Rating Option called
You can also use the
UsageRecordRatingOption field of the RatePlanCharge object to set this value when using the Zuora Commerce API to create a rate plan charge.
Sample Use Case
You provide a semi-annual service, but need the ability to bill weekly or monthly based on the usage volume of the service. With on-demand rating, you still set up the usage charge billing period as semi-annual in the product catalog, and you can set up bill runs to generate invoices weekly, whenever usage records are submitted.
Bill for Usage as Often as Needed in an Open Billing Period
The benefit of using the on-demand usage rating option is that it allows you to bill for usage as many times as needed throughout an open billing period. When a bill run is executed, it triggers rating to occur for all charges (including usage charges) which have not billed - these are usage charges uploaded after the last bill run. The rating of charges is when the cost of the usage is determined, and such usage charges are included on the invoice. The example below describes when a billing period is considered open and closed.
Setting the Bill Run Target Date
The on demand usage rating option still bills for usage in arrears, but you no longer have to wait until the end of the billing period to bill for usage. That is, a usage charge for January 1 can be rated and billed as soon as the day after, on January 2 (this is the bill run target date).
Open Billing Period
Your customer has a bill cycle day set to the 1st of the month and has subscribed to a plan with monthly usage. With the on-demand usage rating option, you can rate and bill for usage as frequently as you would like throughout the month of April by setting the bill run target date equal to a date within the open period for the month of April (between April 1st and April 30th). Any usage uploaded during the open period will be picked up in the next billing run. Therefore, if usage is uploaded every day, each time a bill run is executed to generate an invoice, it will pick up all the usage that has not yet been billed, rate the usage, and include the usage charge amount on the invoice.
Closed Billing Period
In this same example, the billing period for April is closed once an invoice is generated using a bill run target date of May 1st. For this monthly charge, setting the bill run target date to the next bill cycle day (that is, May 1st) will close the April billing period and open up the next billing period for May. Once the April billing period is closed, any additional usage records dated in April will not be picked up and rated for billing.
Alternatively, with the end of billing period usage rating option, you are allowed to bill for April usage only once. After you have created a bill run with a target date of May 1st, it closes the April billing period. It is important to note that after the billing period of a charge is closed, you can still upload usage records for the closed billing period, but they will not be processed.
Changing the Bill Cycle Day
Changing the bill cycle day has an impact on the open period for a charge. In the example above, if you are using the on demand usage rating option and have closed the month of April with a bill run target date of May 1st, changing the bill cycle day from the 1st of the month to the 5th of the month opens up the billing period for the month of April. The billing period for the month of April is now from April 1st to May 4th. The next billing period is from May 5th through June 4th.
Charge Model Support
You can use on-demand usage rating only with per unit, tiered usage, and volume pricing charge models. On-demand usage rating does not support flat fee, tier with overage, and overage usage charge models.
Note: The volume pricing charge model is supported if you have the Active Rating feature enabled.
Usage Records Rating Option is Inherited from the Product Catalog Rate Plan Charge
When adding a per-unit usage charge to a subscription, the Usage Records Rating Option will inherit the setting from the product catalog charge and cannot be updated to use a different usage rating setting. This means, you cannot:
- Select a different usage rating option (than the one set in the product catalog) when adding the usage charge to a subscription.
- You cannot update an existing charge to change the rating option.
Changing the Usage Records Rating Option for an Existing Subscription Charge
If you would like to modify a per-unit usage charge that uses the
End of Billing Period rating option so that going forward usage is billed
On Demand, you will need to do the following:
- In the existing subscription, create two amendments to remove the current usage charge and add the new usage charge (with the On Demand usage rating option).
- When adding the new usage charge, ensure the per-unit usage charge in your product catalog is set to the On Demand rating option.