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Understanding Usage-based Billing
Traditionally One-time, Recurring, and Usage are the three types of billing models. With the advent of service based industries, usage-based billing model is quite popular because customers wish to pay only for what they consume.
For example, a high-tech company may offer a monthly cloud-based data storage product. For this product, the pricing is set up so the price per unit decreases as the total usage increases. This pricing model promotes increased usage volume per customer which in turn creates higher recurring revenue. Usage inputs are totaled monthly and rated using a pricing matrix.
The pricing matrix can be tiered as follows:
- 1 GB to 999 GB: $10 per GB
- 1000 GB to 1999 GB: $9 per GB
- 2000 GB to 2999 GB: $8 per GB
In this scenario, you need to use usage-based billing to successfully rate the usage inputs and invoice your customers the correct rated amount.
Flat or rated amount can be set by a matrix, and it cannot be set by tier.
If a product has the Price Type set to Usage, it is a usage-based product and hence qualifies for the Usage-based billing. When an order containing a usage-based product is activated, Conga Billing generates a Usage Schedule in addition to the Billing Schedule.
You can input the usage volume/quantity through Usage Inputs and Conga Billing will derive the usage amount for that input. The net amount due at the time you generate an invoice then depends on the quantity of the units consumed and the per unit price of the product or service.
You must provide a Usage Inputs to record the usage quantity consumed within a specific duration.
The process flow:
- Create an order with a usage-based product. The product which is now an activated asset will have a Usage and a Billing Schedule generated automatically.
- Enter Usage Input to record the quantity consumed over a period.
- This quantity is reflected in the Usage Schedules for the effective period.
- The rated amount derived from the Usage Input is reflected in the Billing Schedules for the effective period.
In a nutshell, Usage Schedules contain the usage quantity entered through Usage Inputs. Whereas Billing Schedules contain the usage amount corresponding to the usage quantity.