Subscription Level Mark-Up - Invoices

Introduction

This article provides a comprehensive overview of how invoices are generated for different license types based on subscription level mark-up. It covers monthly license-based subscriptions, annual license-based subscriptions, and usage-based subscriptions, explaining the billing engine logic and timing for when mark-ups and discounts are applied to customer invoices.

In this article:

• Monthly License-Based Subscriptions
• Annual License-Based Subscriptions
• Usage-Based Subscriptions

Monthly License-Based Subscriptions

For monthly license-based subscriptions, the billing engine applies mark-up and discount calculations using the following logic: Charge Start Date + 1 Month – 1 Day.

Example Scenario

You purchase a new Microsoft 365 Business Standard subscription with 10 licenses (seats) on June 18 for EUR 3 monthly unit price with a monthly term and monthly billing.

On June 25, you add a 10% discount for this subscription.

July 1st invoice will include:

August 1st invoice will include:

Annual License-Based Subscriptions

Annual subscriptions follow the same mark-up eligibility logic but can have different implications depending on when adjustments are made relative to the invoice generation date.

Scenario 1: Standard Annual Billing

Partner invoice date is the 28th. You purchase a new Microsoft 365 Business Standard subscription with 2 licenses (seats) on January 26 for EUR 8.3 monthly unit price with annual term and annual billing.

On February 10, you add a 10% discount for this subscription.

January 28th, 2022 invoice calculation: EUR 8.3 × 12 months × 2 licenses = 199.2 EUR

On February 23, you add 8 licenses.

February 28th, 2022 invoice will include correction charges:

Correction invoice line aggregates the following charges:

• Period: 01.26.2022 - 01.25.2023: Cycle instances prorate 2 × -99.6 = -199.2 (price with markup/discount = 0%)
• Period: 01.26.2022 - 02.22.2022: Cycle instances prorate 2 × 7.640548 = 15.281095 (price with discount = -10%, includes 28 days)
• Period: 02.23.2022 - 02.25.2022: Cycle instances prorate 10 × 0.736767 = 7.36767 (price with discount = 10%, includes 3 days)
• Period: 02.26.2022 - 01.25.2023: Cycle instances prorate 10 × 82.026739 = 820.2673973 (price with discount = 10%, includes 334 days)

Scenario 2: Timing Implications

Partner invoice date is the 28th. You purchase a new Microsoft 365 Business Standard subscription with 2 licenses (seats) on January 21st for EUR 8.3 monthly unit price with annual term and annual billing.

Customer mark-up calculation logic: 21.01.2022 + 1 Month - 1 Day = 20.02.2022

Mark-up timing implications:

• If customer mark-up is adjusted between January 21st and 27th, then customer mark-up will be calculated in the first invoice
• If customer mark-up is adjusted after the 1st invoice is generated but within the mark-up eligibility period (before 20.02.2022), then the 1st invoice will be generated without mark-up, but the 2nd invoice will calculate a correction to adjust for the mark-up in the previous period
• If customer mark-up is adjusted after 20.02.2022, then mark-up will be calculated with the billing cycle anniversary date next year, unless there are license quantity adjustments

Usage-Based Subscriptions

For usage-based subscriptions, the mark-up/discount logic follows: Charge End Date – 1 Day.

Example Scenario

On June 18, you purchase an Azure Plan subscription under which you consume different resources for 10,000 EUR.

On June 25, you add a 10% discount for this subscription.

July 1st, 2022 invoice calculation: The billing engine calculates as follows: Charge End Date (30.06.2022) - 1 day = 29.06.2022. Since 29.06.2022 is after 25.06.2022 (when discount was added), the discount is applied in the July invoice.

Summary

This article explains how subscription level mark-up affects invoice generation across different subscription types. Monthly and annual license-based subscriptions use the "Charge Start Date + 1 Month – 1 Day" logic, while usage-based subscriptions use the "Charge End Date – 1 Day" logic. Understanding these timing rules is essential for predicting when mark-ups and discounts will appear on customer invoices and planning correction invoices when necessary.

Limitations

The billing engine automatically calculates mark-up eligibility based on predefined date logic that cannot be manually overridden. For complex scenarios involving multiple license adjustments or billing cycle changes, correction invoices may be generated automatically, which could affect cash flow timing and customer billing expectations.