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CCV calculation for evergreen subscriptions

Zuora

CCV calculation for evergreen subscriptions

Billing - Revenue Integration supports the unbilled revenue recognition for evergreen subscriptions upon booking. It means that the CCV amount is generated for evergreen subscriptions upon subscription creation.

How CCV is calculated

The estimated subscription end date is set based on the billing end date for the current accounting period. When an evergreen subscription is created, the CCV service adds 1 day to the current billing period end date as the estimated end date for CCV calculation. When a new billing period starts, the CCV service runs a scheduled job to set the estimated end date to the end date of the new billing period and recalculate CCV.

CCV for different billing timing types

Zuora Billing supports two types of billing timing for recurring charge types: Bill in Advance and Bill in Arrears. The CCV for Bill in Arrears charges is lower than that of the Bill in Advance charges by one billing period's charge. It is because for Bill in Arrears charges, invoices are created for the current billing period only when the target date is later than the end of the billing period. The following table provides a comparison between two billing timing types for the same subscription:

  Bill in Advance Bill in Arrears
Billing period Month Month
Bill Cycle Day 1st of Month 1st of Month
Amount $100 $100
Subscription start date 2020-01-01 2020-01-01
On 2020-10-10 (Target date is 2020-10-31)
CCV 1,000 900
SO Line End Date 2020-10-31 2020-09-30
On 2020-11-01 (Target date is 2020-11-30)
CCV 1,100 1,000
SO Line End Date 2020-11-30 2020-10-31

CCV calculation examples

See the examples below to understand how CCV for evergreen subscriptions is determined.

Example 1 - Create an evergreen subscription

Your customer AOB creates a subscription, A-S0000001, for your software service on 2019-01-10. The bill cycle day (BCD) is the default setting of the customer account, which is the 1st day of every month.

The subscription includes the following rate plan charges:

  • A regular charge of $100/month. The billing timing is set to Bill in Advance.
  • A 10% discount charge at the subscription level.

The original rate plan charge data is as below:

Charge  Type Billing period Amount (/month) Segment Start Date
C-0000001 Regular Month 100 1 2019-01-10
C-0000002 Discount (10%) Month 10% 1 2019-01-10

The CCV service will add 1 day to the current billing period end date as the estimated end date for CCV calculation. Because the billing period is monthly, the current billing period is Jan 2019 and the billing period end date is 2019-1-31. So the CCV end date will be set to 2019-02-01 (exclusive).

Therefore, the CCV data is as below:

Charge  Segment CCV Applied to Start Date End Date
C-0000001 1 100*22/31 = 70.97    2019-01-10 2019-02-01
C-0000002 1 (7.10) C-0000001 2019-01-10 2019-02-01

Note that this end date is named as ESTIMATE_EVERGREEN_END_DATE and is only displayed on the CCV result. The end date of the actual rate plan charge is stillNull.

Because the CCV end date is exclusive of the estimated CCV end date, the end date for SO lines are 1 day earlier than the estimated CCV end date: 

SO ID  Type EXT_SLL_PRC Applied To Start Date End Date
C-0000001.1 SO 70.97    2019-01-10 2019-01-31
C-0000002.1 SO (7.10) C-0000001-1 2019-01-10 2019-01-31

On 2019-02-01, a scheduled job for the CCV service is triggered to set the estimated CCV end date to the current billing period end date + 1 day. In this case, the estimated CCV end date is updated to 2019-03-01. CCV is then recalculated to:

Charge  Segment CCV Applied to Start Date End Date
C-0000001 1 170.97    2019-01-10 2019-03-01
C-0000002 1 (17.10) C-0000001 2019-01-10 2019-03-01

Example 2 - Create a bill run 

After creating the subscription A-S0000001, AOB creates a bill run for this subscription on the same day (2019-01-10). The target date is set to 2019-02-28.

The generated invoice items are listed as below:

ID Charge Amount Applied To Start Date End Date
II-1-1 C-0000001 70.97   2019-01-10 2019-01-31
II-2-1 C-0000002 (7.10) C-0000001-1 2019-01-10 2019-01-31
II-1-2 C-0000001 100   2019-02-01 2019-02-28
II-2-2 C-0000002 (10) C-0000001-2 2019-02-01 2019-02-28

When creating the evergreen subscription, the estimated CCV end date was supposed to be 2019-02-01. However, because the bill run target date is later than the estimated CCV end date, CCV will be recalculated based on the bill run end date. Thus, the CCV for each charge is adjusted as below:

Charge  Segment CCV Applied to Start Date End Date
C-0000001 1 170.97   2019-01-10 2019-03-01
C-0000002 1 (17.10) C-0000001-1 2019-01-10 2019-03-01

The following table lists the SO lines for these charges in Zuora Revenue: 

SO ID  Type EXT_SLL_PRC Applied To Start Date End Date
C-0000001.1 SO 170.97    2019-01-10 2019-02-28
C-0000002.1 SO (17.10) C-0000001-1 2019-01-10 2019-02-28

On 2019-03-01, the estimated CCV end date is adjusted to 2019-04-01. CCV is then recalculated to:

Charge  Segment CCV Applied to Start Date End Date
C-0000001 1 270.97    2019-01-10 2019-04-01
C-0000002 1 (27.10) C-0000001 2019-01-10 2019-04-01