Correction for license quantity change
Introduction
This article explains how Proration works when you change the Quantity of licenses during a Billing Cycle. It demonstrates the billing calculations that occur when licenses are added mid-cycle, showing how Correction charges are applied in subsequent reconciliation files. The article is intended for Seller Admins and finance teams who need to understand monthly billing adjustments.
In this article:
Understanding the billing scenario
When you modify your License quantity during an active Billing Period, the system applies Proration to charge you only for the additional licenses for the remaining days in that period. This ensures fair billing based on actual usage time.
Reviewing the reconciliation timeline
Consider the following example where your Billing Cycle Day is the 1st of each month. On May 7, you purchase a new License-Based Subscription with one license for EUR 4.00 per Monthly Billing cycle.
Initial purchase - June 1 reconciliation file
The June 1 reconciliation file contains the initial Purchase Fee:
| Charge Start Date | Charge End Date | Charge Type | Unit Price | Quantity | Amount |
|---|---|---|---|---|---|
| 07.05.2018 | 07.06.2018 | Purchase fee | 4.00 | 1 | 4.00 |
Quantity increase - July 1 reconciliation file
On June 18, you increase your license quantity from one to two. The July 1 reconciliation file shows the standard Cycle Fee for the original license:
| Charge Start Date | Charge End Date | Charge Type | Unit Price | Quantity | Amount |
|---|---|---|---|---|---|
| 07.06.2018 | 07.07.2018 | Cycle fee | 4.00 | 1 | 4.00 |
Correction applied - August 1 reconciliation file
The August 1 reconciliation file includes both the new quantity charge and the prorated Correction for the previous period:
| Charge Start Date | Charge End Date | Charge Type | Unit Price | Quantity | Amount |
|---|---|---|---|---|---|
| 07.07.2018 | 07.08.2018 | Cycle fee | 4.00 | 2 | 8.00 |
| 07.06.2018 | 07.07.2018 | Correction | 2.26 | 1 | 2.26 |
Calculating the correction amount
The correction calculation follows these steps:
The monthly Cost Price is EUR 4.00, and there are 30 days in the service period from June 7, 2018 to July 7, 2018. This equals a daily rate of EUR 0.133 (calculated as 4.00 divided by 30).
The proration period runs from June 18, 2018 to July 4, 2018, which includes 17 days (including the date of the change).
Summary
When you change license quantities mid-cycle, the system applies proration to ensure accurate billing. The correction charge appears in the reconciliation file one billing cycle after the change occurs, reflecting the prorated cost for the additional licenses during the partial period. Understanding this timeline helps you anticipate and verify billing adjustments in your reconciliation reports.
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