The literal meaning of "proration" is to divide or distribute proportionally. For Billing, proration means the way a billed amount is distributed over partial billing cycles.

Let us take a look at the following scenarios to understand what proration is and why it is required.

Scenario 1

Start Date: 1/1/2016   End Date: 12/31/2016
The customer has opted for a monthly subscription to a product, where he starts using the services on the 1st of January 2016, and wants the invoice on the 1st of each month.

Here, the customer is consuming the product for a full month. This is a non-prorated scenario because Billing Schedules generated for this purchase will be even and uniformly distributed.

Scenario 2

Start Date: 1/20/2016   End Date: 1/19/2017

This scenario is similar to Scenario 1, except for the change in Start Date. The customer starts using the services on the 20th of January 2016 and wants the invoice on the 1st of each month.
In this case, you would want to charge customers only for the duration (11 days) they have used the services rather than charging them for the entire month. To account for this partial period you’ll need the charge applicable for just this period which is the prorated amount. This prorated amount must be distributed proportionally between the resulting Billing Schedules.

Now there are different ways through which you can choose to distribute the prorated amount in Billing Schedules and thereby in the invoices,

  • You could account for only 11 days, and send an invoice on the first of the month,
  • You could combine the 11 days in the first full month and then invoice the customer or
  • You might want to account for these 11 days in the last Billing Schedule of the Billing Cycle, thereby invoicing customers at the end of the contract.

Conga Billing offers the following Proration Treatment to comply with your business needs and practices:

  • Separate Period

Proration, first of all, derives the prorated amount and second, identifies in which Billing Schedules it should distribute this amount. This is based on your selection of the Proration Treatment, each of which is explained in the following sections.

Separate Period

This is the default Proration Treatment. The prorated amount is separated out completely in two partial periods at the start and end of Billing Schedules.

Start DateEnd DateReady for Billing DateFee Amount
1/15/20151/14/20162/1/2015$100
SchedulePeriod Start DatePeriod End DateFee Amount
BS11/15/20151/31/201550
BS22/1/20152/28/2015100
BS1212/1/201512/31/2015100
BS131/1/20161/14/201650


The Conga Billing Proration:

  • Identifies if the period is a full period or a partial period.
  • Derives the number of partial days.
  • Calculates the prorated amount for partial days.
  • Picks the applicable Proration Period Treatment based on the number of days for each partial period.
  • Distributes the prorated amount in rest of the Billing Schedules proportionally.

To apply any one of the Proration behaviors, go to Billing Preferences and select a Proration Period Treatment as Separate Period. For information on Billing Preferences, please refer to Billing Preferences.

Note

Proration period Treatment is always Separate Period whenever you Add, Remove, Amend or Terminate services in the middle of the Billing Cycle.

New Proration Method to Bill the Round-Offs

Billing supports a new method to bill the round-offs. The current and new behaviors are discussed as follows:

The current behavior of Billing is to round off the balances to the last billing schedule. Billing implements a logic where it defers the rounding-off of the balances arising from proration, odd selling terms, partial periods, or amendments in the middle of the period to the last billing schedule.

In its new behavior, Billing rounds off the balances arising from proration, odd selling terms, partial periods, or amendments in the middle of the period to the first billing schedule. You can define and understand the “first billing schedule” in a varied ways depending on the following scenarios:

Scenario

First billing schedule

New sale

The very first billing schedule

Amendment

The very first billing schedule from when the amendment comes into effect

Renewal

The very first billing schedule from when the renewal comes into effect

Termination

The very first billing schedule from when the termination period starts

You must enable the managed package field setting Bill Prorated Balance In First Schedule for the new behavior to work. The process is given below.

Prerequisites

  • There is no billing plan associated with the asset line item.
  • Ensure that the asset for which you want to enable this functionality is a new asset.

To enable the field setting

Enable the Bill Prorated Balance In First Schedule field setting as follows:

  1. Go to Setup>Custom Settings>Billing System Properties.
  2. Click Manage.
    The Custom Settings Billing System Properties page is displayed.
  3. Click System Properties.
    The Billing System Properties details page is displayed.
    1. Click Edit.
      Billing System Properties Edit page is displayed.
  4. Select the Bill Prorated Balance In First Schedule checkbox.
  5. Click Save.

The system enables the field setting so that the rounding-off can now happen in the first billing schedule.

Let's understand the two proration methods with the help of a simple example. 

Suppose you are a billing administrator of a company selling computer hardware 'Installation Device MF9’ with a Total Contract Value of $1000. The billing term is for 3 months starting from 3/1/2023 with a recurring billing schedule. Billing creates three billing schedules. The round-offs are adjusted in the first or last billing schedule depending on whether the 'BillProratedBalanceInFirstSchedule' checkbox is selected or not.

Scenario 1: The BillProratedBalanceInFirstSchedule checkbox is selected.

Billing adjusts the round-offs in the first billing schedule as shown in the table:

Billing Schedule ID

Period Start Date

Period End Date

Fee Amount

Ready for Invoice Date

Type

Status

BS-0013/1/20233/31/2023$333.341/1/2023ContractedPending Billing
BS-0024/1/20234/30/2023$333.334/1/2023ContractedPending Billing
BS-0035/1/20235/31/2023$333.335/1/2023ContractedPending Billing

 

Scenario 2: The BillProratedBalanceInFirstSchedule checkbox is not selected.

Billing defers the round-offs to the last billing schedule as shown in the table:

Billing Schedule ID

Period Start Date

Period End Date

Fee Amount

Ready for Invoice Date

Type

Status

BS-0013/1/20233/31/2023$333.331/1/2023ContractedPending Billing
BS-0024/1/20234/30/2023$333.334/1/2023ContractedPending Billing
BS-0035/1/20235/31/2023$333.345/1/2023ContractedPending Billing