Prorated charges for license-based subscriptions

Introduction

This article explains how prorated charges are calculated and displayed in Reconciliation Files by Microsoft and the Platform. Understanding these calculations helps Seller Admins and partners accurately reconcile billing data and import information into ERP systems. The article covers Microsoft's calculation methodology, potential discrepancies in reconciliation files, and how the Platform aggregates prorated charges for simplified billing.

Understanding Microsoft's proration methodology

Microsoft includes a separate charge line in the Reconciliation File for each different Quantity of Licenses used for a specific number of days during the Billing Period. This approach ensures accurate billing based on actual usage but can create complexity when reviewing reconciliation data.

Microsoft recalculates the unit price for prorated charges based on the number of days licenses were active. The calculation uses the full monthly price divided by the number of days in the month, then multiplied by the number of days the specific license quantity was in use.

This calculation method can lead to discrepancies when manually multiplying the displayed unit price by quantity, as the result may not match the Amount and Subtotal columns in Microsoft's reconciliation file. These differences occur because Microsoft performs calculations using the full, unrounded unit price internally.

Scenario example: License changes during billing cycle

Consider a Customer who purchased Office 365 E1 licenses on September 16, 2020. Based on the purchase date, the 16th becomes the Subscription-level Billing Cycle Day.

During the subscription lifecycle, the customer makes the following changes:

• On March 16, 2021: Adds 5 licenses
• On April 12, 2021: Reduces license count by 495

After both actions, the customer has 5 licenses remaining.

Microsoft issues a Reconciliation File containing the following lines:

Detailed calculation methodology

To calculate charges in line 2, Microsoft uses the following method: During the period from March 16, 2021 until April 11, 2021, the customer had 500 licenses for 27 days. The unit price is calculated by dividing the unit price from the Microsoft pricelist by the number of days in the month and multiplying by the number of days in use.

The same logic applies for the 5 license quantity, where 51.93 ÷ 31 × 4 = 6.70 EUR.

Microsoft uses the full unit price (45.22935484) to calculate the Amount and Subtotal columns: 45.22935484 × 500 = 22,614.68 EUR. However, the Reconciliation File displays the unit price with only two digits after the decimal point (45.22).

This creates a scenario where multiplying the displayed unit price by quantity produces a slightly different result: 45.22 × 500 = 22,610 EUR versus the actual 22,614.68 EUR shown in Microsoft's Amount column.

How Platform manages calculations

The Platform billing engine manages calculations differently to ensure overall amounts match and provide a simplified reconciliation experience.

The Platform ensures that prorated charges are aggregated and displayed in a user-friendly manner. This approach allows reconciliation data to be easily uploaded into ERP systems without manual calculations or adjustments.

Summary

This article explains how Microsoft calculates prorated charges for License-Based Subscriptions and displays them in Reconciliation Files. Microsoft creates separate charge lines for each license quantity change and uses the full unit price for calculations, though only two decimal places are displayed. This can create apparent discrepancies when manually verifying calculations. The Platform addresses these challenges by aggregating prorated charges into a single line item, ensuring amounts match Microsoft's calculations while providing a simplified format compatible with ERP system imports.