Invoice Example – Cancel Subscription

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Introduction

This article provides a comprehensive overview of how subscription cancellations affect billing and appear in reconciliation files. It explains the proration calculations for refunds, demonstrates how transactions are recorded in both Microsoft and the Platform reconciliation files, and clarifies the impact of cancellation timing on charges.

In this article:

Understanding Subscription Purchase Charges

When you purchase a Monthly Billing subscription, you are charged for the entire Billing Cycle based on the Billing Cycle Day. The charge appears in both the Microsoft and the Platform Reconciliation Files.

Purchase Example

If you purchased a monthly Subscription on October 12th, 2021, the transaction appears as follows:

Microsoft reconciliation file:
Order Date Charge Type Cost Price Total Charge Start Date Charge End Date Effective Unit Price Quantity
10/12/2021 new 3 30 10/12/2021 11/11/2021 3 10
Platform reconciliation file:
Charge Type Revenue Unit Price Revenue Total Price Charge Start Date Charge End Date Cost Unit Price Customer Quantity Cost Total Price
Purchase Fee 3 30 10/12/2021 11/11/2021 3 10 30

Immediate Cancellation on Purchase Date

When you cancel a subscription on the same day as purchase (October 12th), you receive a full refund for the unused Billing Period.

Cancellation Transaction

Microsoft reconciliation file:
Order Date Charge Type Cost Price Total Charge Start Date Charge End Date Effective Unit Price Quantity
10/12/2021 cancelImmediate 3 -30 10/12/2021 11/11/2021 -3 10
Platform reconciliation file:
Charge Type Revenue Unit Price Revenue Total Price Charge Start Date Charge End Date Cost Unit Price Customer Quantity Cost Total Price
Correction -3 -30 10/12/2021 11/11/2021 -3 10 -30

Cancellation Within the First Week

When you cancel a subscription within the first seven days, Proration applies based on the number of days used versus unused in the Billing Cycle.

Cancellation on October 13th

Microsoft reconciliation file:
Order Date Charge Type Cost Price Total Charge Start Date Charge End Date Effective Unit Price Quantity
10/12/2021 cancelImmediate 3 -30 10/13/2021 11/11/2021 -3 10
Platform reconciliation file:
Charge Type Revenue Unit Price Revenue Total Price Charge Start Date Charge End Date Cost Unit Price Customer Quantity Cost Total Price
Correction -3 -30 10/13/2021 11/11/2021 -3 10 -30

Cancellation on October 14th

Microsoft reconciliation file:
Order Date Charge Type Cost Price Total Charge Start Date Charge End Date Effective Unit Price Quantity
10/12/2021 cancelImmediate 3 -29 10/14/2021 11/11/2021 -2.9 10
Platform reconciliation file:
Charge Type Revenue Unit Price Revenue Total Price Charge Start Date Charge End Date Cost Unit Price Customer Quantity Cost Total Price
Correction -2.9 -29 10/14/2021 11/11/2021 -2.9 10 -29

Cancellation on October 15th

Microsoft reconciliation file:
Order Date Charge Type Cost Price Total Charge Start Date Charge End Date Effective Unit Price Quantity
10/12/2021 cancelImmediate 3 -28 10/15/2021 11/11/2021 -2.8 10
Platform reconciliation file:
Charge Type Revenue Unit Price Revenue Total Price Charge Start Date Charge End Date Cost Unit Price Customer Quantity Cost Total Price
Correction -2.8 -28 10/15/2021 11/11/2021 -2.8 10 -28

Proration Calculation Explained

When you purchase a subscription, you are charged for the total number of days in the Billing Cycle according to the billing plan.

When you cancel a subscription within the allowed window, you receive a prorated refund for the unused billing days in the Billing Cycle from the cancellation date.

Calculation Formula

Effective Unit Price = Cost Price / total number of days in the Billing Cycle × number of used days (or unused days for refunds)

Example: -2.8 = (3 / 30) × 28
Cost (before tax): Effective Unit Price × Quantity

Example: 28 = 2.8 × 10

How Seat Adjustments Work

When you add or remove Seats (licenses), the system triggers refund and readjustment transactions. Two transactions are generated to complete the event:

  1. First transaction: A negative amount (Correction) representing a refund for unused billing days in the Billing Cycle for the quantity before adjustment
  2. Second transaction: A positive amount with prorated cost for remaining billing days for the adjusted quantity after adding or removing seats

Similar to the Microsoft example, the Platform generates two Invoice lines: one with the Cycle Fee and one with the refund.

Summary

Understanding subscription cancellations and their impact on billing is essential for accurate financial tracking. When you cancel a subscription, you receive prorated refunds based on unused billing days. The cancellation appears in both Microsoft and the Platform reconciliation files with negative values representing the refund amount. The proration calculation ensures you only pay for the days you used the service.

Related Content

reconfile compliant rw_v1 Microsoft Invoices

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