Proration and Corrections

Updated by Appxite October 23, 2025 09:55

Introduction

Proration ensures customers pay only for the services they actually use when subscription changes occur mid-cycle. This article provides a comprehensive guide to how prorations and corrections work in the Platform. You'll learn when proration is applied, how prorated charges are calculated, and how Corrections appear on invoices. Understanding these concepts is essential for managing subscription changes, billing adjustments, and ensuring accurate invoicing for partial billing periods.

Understanding Proration

What is Proration?

Proration is the process of calculating charges or credits for partial billing periods. The Platform uses proration when:

Subscriptions are purchased mid-cycle
License quantities change during a billing period
Subscriptions are suspended or reactivated
Billing frequency changes
Subscriptions are canceled before the end of a billing period

Why Proration Matters

Proration ensures customers only pay for what they use. Without proration:

Customers would pay full price regardless of when services start or end
Changes to subscriptions would only take effect at the next billing cycle
Early cancellations wouldn't result in appropriate refunds

How Corrections Work

Correction Charge Type

The Platform uses the Correction charge type to represent prorated adjustments on invoices. Key features of corrections:

Corrections always have a quantity of 1
Unit Price equals Total Price for corrections
Corrections can be positive (charges) or negative (credits)
Multiple subscription changes may result in a single correction that represents the net effect

When Corrections Appear

Corrections appear on invoices in these scenarios:

Quantity Changes: When licenses are added or removed mid-cycle
Status Changes: When subscriptions are suspended or reactivated
Billing Changes: When billing frequency changes
Cancellations: When subscriptions are canceled before the period ends
Discounts: When discounts are applied or removed
Refunds: When services are refunded for any reason

Proration Calculation Method

Basic Formula

The Platform uses this formula for prorating charges:

Prorated Amount = (Original Amount / Total Days in Period) × Days Applicable

Components of the Calculation

Original Amount: The full charge for the entire period
Total Days in Period: Number of days in the billing period
Days Applicable: Number of days the change applies to

Date Handling

The platform follows these rules when calculating days for proration:

Start Date: Included in the calculation
End Date: Not included in the calculation
Calendar Days: All calendar days are counted, including weekends and holidays

Proration Examples

Example 1: Adding Licenses Mid-Cycle

Scenario:

Monthly subscription with 10 licenses at $10 per license
Billing cycle: 15th to 14th (e.g., Jan 15 - Feb 14)
On January 25, customer adds 5 more licenses

Calculation:

Full monthly cost for 5 additional licenses: 5 × $10 = $50
Days remaining in period: 20 days (Jan 25 - Feb 14, not including Feb 14)
Total days in period: 31 days (Jan 15 - Feb 14, not including Feb 14)
Prorated cost: $50 × (20/31) ≈ $32.26

On next invoice (Feb 15):

Regular Cycle Fee for 15 licenses: $150
Correction (prorated charge for added licenses): $32.26

Example 2: Removing Licenses Mid-Cycle

Scenario:

Monthly subscription with 20 licenses at $10 per license
Billing cycle: 1st to 31st/30th
On Jan 15, customer reduces to 15 licenses

Calculation:

Full monthly cost for 5 reduced licenses: 5 × $10 = $50
Days remaining in period: 16 days (Jan 16 - Jan 31, not including Jan 31)
Total days in period: 31 days
Prorated credit: $50 × (16/31) ≈ $25.81

On next invoice (Feb 1):

Regular Cycle Fee for 15 licenses: $150
Correction (prorated credit for removed licenses): -$25.81

Example 3: Subscription Suspension

Scenario:

Annual subscription with 5 licenses at $120 per license
Annual cost: $600
Subscription suspended from July 1 to August 15

Calculation:

Days of suspension: 46 days (Jul 1 - Aug 15, not including Aug 15)
Total days in period: 365 days
Prorated credit: $600 × (46/365) ≈ $75.62

On next invoice:

Correction (prorated credit for suspension period): -$75.62

Special Proration Scenarios

Billing Frequency Changes

When billing frequency changes, corrections are calculated based on:

Credit for the unused portion of the original billing period
Charge for the new billing period starting from the change date

For detailed examples, see: Managing Billing Frequency Changes

Tiered Pricing

For subscriptions with tiered pricing:

The appropriate tier is determined based on the total quantity after the change
Proration calculations use the per-unit price from that tier

Add-on Subscriptions

When prorating add-on subscriptions:

The add-on follows the billing cycle of the parent subscription
Proration calculations align with the parent's billing period

Corrections on Invoices

How to Identify Corrections

On invoices, corrections have these characteristics:

Charge Type: "Correction"
Quantity: Always 1
Description: Includes information about the reason for the correction
Amount: Can be positive (additional charge) or negative (credit)

Grouping of Corrections

Depending on your invoice settings:

Corrections may be grouped into a single line item per subscription
Detailed corrections may show each adjustment separately

To configure detailed corrections display, see Detailed Invoice Line Items.

Summary

Proration in the Platform ensures accurate billing when subscription changes occur mid-cycle by calculating charges or credits for partial billing periods. The Platform uses the Correction charge type to represent these prorated adjustments on invoices, with Corrections always having a Quantity of 1 and Cost Price equal to Total Price. Proration calculations follow a straightforward formula based on the number of applicable days divided by total days in the Billing Period. Corrections can be positive or negative and appear when Licenses are added or removed, when subscriptions are suspended or reactivated, when Billing Frequency changes, or when cancellations occur.

Invoice correction Prorated fees compliant rw_v1

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