Invoice Example – Add/remove licenses
Introduction
This article explains how Proration works when you add or remove licenses during a Billing Cycle. It demonstrates the calculation methods used by Microsoft and the Platform, helping you understand the charges and credits that appear on your Invoices when modifying License-Based Subscriptions.
In this article:
- Example scenario: Adding and removing licenses
- Microsoft reconciliation data
- Platform reconciliation data
- Understanding the calculations
Example scenario: Adding and removing licenses
Consider a scenario where you purchased 10 Seats of the "Microsoft 365 Business Standard" Subscription on October 1st and made several Quantity changes until October 7th.
Subscription details:
- Product: Microsoft 365 Business Standard
- Cost Price: 3 EUR per Seat
- Billing Cycle: Monthly (October has 31 days)
- Initial Purchase Fee: 10 Seats on October 1st
Transaction history:
| Date | Quantity Change | Action |
|---|---|---|
| 1st of Oct | 10 | Purchase 10 Seats |
| 2nd of Oct | -3 | Reduce 3 Seats |
| 3rd of Oct | +5 | Add 5 Seats |
| 4th of Oct | -2 | Reduce 2 Seats |
| 5th of Oct | -3 | Reduce 3 Seats |
| 6th of Oct | -2 | Reduce 2 Seats |
| 7th of Oct | -1 | Reduce 1 Seat (not allowed) |
Microsoft reconciliation data
Microsoft generates Reconciliation Data showing each transaction with prorated charges. The Reconciliation File includes the following line items:
| Order Date | Charge Type | Cost Price | Total Charge | Charge Start Date | Charge End Date | Effective Unit Price | Billable Quantity |
|---|---|---|---|---|---|---|---|
| 10/1/2021 | new | 3 | 30 | 10/1/2021 | 10/31/2021 | 3 | 10 |
| 10/2/2021 | removeQuantity | 3 | -29 | 10/2/2021 | 10/31/2021 | -2.9 | 10 |
| 10/2/2021 | removeQuantity | 3 | 20.3 | 10/2/2021 | 10/31/2021 | 2.9 | 7 |
| 10/3/2021 | addQuantity | 3 | -19.6 | 10/3/2021 | 10/31/2021 | -2.8 | 7 |
| 10/3/2021 | addQuantity | 3 | 33.6 | 10/3/2021 | 10/31/2021 | 2.8 | 12 |
| 10/4/2021 | removeQuantity | 3 | -32.4 | 10/4/2021 | 10/31/2021 | -2.7 | 12 |
| 10/4/2021 | removeQuantity | 3 | 27 | 10/4/2021 | 10/31/2021 | 2.7 | 10 |
| 10/5/2021 | removeQuantity | 3 | -26.1 | 10/5/2021 | 10/31/2021 | -2.61 | 10 |
| 10/5/2021 | removeQuantity | 3 | 18.27 | 10/5/2021 | 10/31/2021 | 2.61 | 7 |
| 10/6/2021 | removeQuantity | 3 | -17.57 | 10/6/2021 | 10/31/2021 | -2.51 | 7 |
| 10/6/2021 | removeQuantity | 3 | 12.55 | 10/6/2021 | 10/31/2021 | 2.51 | 5 |
Platform reconciliation data
The Platform consolidates all Proration adjustments into simplified Invoice line items:
| Order Date | Charge Type | Revenue Unit Price | Revenue Total Price | Charge Start Date | Charge End Date | Cost Unit Price | Customer Quantity | Cost Total Price |
|---|---|---|---|---|---|---|---|---|
| Not available | Purchase Fee | 3 | 30 | 10/1/2021 | 10/31/2021 | 3 | 10 | 30 |
| Not available | Correction | -12.95 | -12.95 | 10/1/2021 | 10/31/2021 | -12.95 | 1 | -12.95 |
The first Detailed Invoice Line Items entry shows charges for the full month usage of the Subscription. The second entry shows a Correction of -12.95 EUR, which consolidates all the Quantity changes.
Understanding the calculations
The Platform calculates the consolidated Correction by summing all individual transaction adjustments from the Reconciliation Data.
October 2nd: Reducing 3 Seats
- Refund for unused period: The system calculates the refund for the period from October 2nd to October 31st (30 days). Refund = Effective Unit Price (3 / 31 × 30) × Billable Quantity (10) = 29 EUR
- Cost for remaining Seats: The cost for the 7 remaining Seats for the same period. Cost = Effective Unit Price (3 / 31 × 30) × Billable Quantity (7) = 20.3 EUR
October 3rd: Adding 5 Seats
- Refund for unused period: Refund for the period from October 3rd to October 31st (29 days) for the previous Quantity. Refund = Effective Unit Price (3 / 31 × 29) × Billable Quantity (7) = 19.6 EUR
- Cost for new Seats: Cost for the 12 total Seats for the remaining period. Cost = Effective Unit Price (3 / 31 × 29) × Billable Quantity (12) = 33.6 EUR
October 4th: Reducing 2 Seats
- Refund for unused period: Refund for the period from October 4th to October 31st (28 days) for 12 Seats. Refund = Effective Unit Price (3 / 31 × 28) × Billable Quantity (12) = 32.4 EUR
- Cost for remaining Seats: Cost for 10 Seats for the remaining period. Cost = Effective Unit Price (3 / 31 × 28) × Billable Quantity (10) = 27 EUR
October 5th: Reducing 3 Seats
- Refund for unused period: Refund for the period from October 5th to October 31st (27 days) for 10 Seats. Refund = Effective Unit Price (3 / 31 × 27) × Billable Quantity (10) = 26.1 EUR
- Cost for remaining Seats: Cost for 7 Seats for the remaining period. Cost = Effective Unit Price (3 / 31 × 27) × Billable Quantity (7) = 18.27 EUR
October 6th: Reducing 2 Seats
- Refund for unused period: Refund for the period from October 6th to October 31st (26 days) for 7 Seats. Refund = Effective Unit Price (3 / 31 × 26) × Billable Quantity (7) = 17.57 EUR
- Cost for remaining Seats: Cost for 5 Seats for the remaining period. Cost = Effective Unit Price (3 / 31 × 26) × Billable Quantity (5) = 12.55 EUR
Total consolidated correction
The Platform sums all adjustments to create a single Correction line item:
Correction = -29 + 20.3 - 19.6 + 33.6 - 32.4 + 27 - 26.1 + 18.27 - 17.57 + 12.55 = -12.95 EUR
This consolidated approach simplifies your Invoice while maintaining accurate Proration calculations for all License changes during the Billing Period.
Summary
When you modify License-Based Subscriptions during a Billing Cycle, both Microsoft and the Platform apply Proration to ensure you only pay for actual usage. Microsoft provides Detailed Invoice Line Items for each transaction, while the Platform consolidates these into simplified Correction entries. Understanding these calculations helps you verify your Invoices and manage your Subscription costs effectively.
Add comment
Please sign in to leave a comment.