Prorated Charges

This scenario will describe how prorated charges are calculated and shown in reconciliation file by Microsoft and AppXite Platform billing engine. 

Summary:

  1. Microsoft includes charge line in reconciliation file for each different quantity of licenses used for # of days.
  2. Microsoft recalculates Unit Price for prorated charges based on # of days licenses were used.
  3. Microsoft calculates Amount and Subtotal columns based on full Unit Price (no rounding applied on Unit Price).
  4. Unit Price shown in reconciliation file is with two digits after comma (remaining digits after comma are cut off).
  5. As arithmetic calculation does not coincide between multiple of Unit Price and Quantity and sum in the Amount and Subtotal columns that can lead to extra questions from partners about data accuracy.
  6. At current moment Microsoft calculation method for prorated charges and rounding principles is not documented by Microsoft in CSP documentation.
  7. Reconciliation data from Microsoft cannot be automatically imported into most ERP systems that as default setting calculate invoice amount by multiplying Unit Price with Quantity.
  8. AppXite Platform reconciliation file includes one charge line for cycle fee and one aggregated charge line for prorated charges.

Scenario: 

Customer has purchased Office 365 E1 licenses on 16.09.2020. Based on the purchase date 16 will become subscription level billing cycle. 

During subscription lifecycle customer does multiple changes: 

  • On 16.03.2021. adds 5 licenses.
  • On 12.04.2021. reduces license count by 495.

After both actions customer in the end has 5 licenses. 

Microsoft for these changes will issue reconciliation file that will contain such lines: 

No

Unit Price

Quantity

Amount

Subtotal

Comments

1

51.93

5

259.65

259.65

Cycle fee for the next period (paid upfront for license-based subscriptions).

2

45.22

500

22 614.68

22 614.68

Charges for period from 16.03.2021. until 11.04.2021. for 500 licenses.

3

6.7

5

33.5

33.5

Charges for period from 12.04.2021. until 15.04.2021. for 5 licenses.

4

51.93

495

-25 705.35

-25 705.35

Correction for 495 licenses that had been paid upfront.

Important to note: Microsoft calculates Unit Price for prorated charges based on # of days specific license quantity was in place.

For example, to calculate charges in line 2 Microsoft uses such method: In period from 16.03.2021. until 11.04.2021 customer had 500 licenses for 27 days. Unit Price is then calculated by dividing Unit price in the Microsoft pricelist with # of days in the month and multiplying by # days in use i.e., 51.93 / 31 * 27 = 45.22935484 EUR.

Same logic applies for license quantity 5, where 51.93 / 31 * 4 = 6.7 EUR.

Important to note: Microsoft uses full Unit Price to calculate Amount and Subtotal columns (45.22935484 * 500 = 22 614.68 EUR). However, in reconciliation file Unit price with only two digits after comma is visible. This can lead to a scenario where customer multiplies Unit Price with Quantity and gets slightly different result compared to Amount and Subtotal columns from Microsoft reconciliation file - 22 610 EUR vs 22 614.68 EUR.

At current moment calculation method is not documented by Microsoft in CSP documentation and thus can cause unclarity for partners receiving invoice.

AppXite Platform billing engine manages calculations differently and ensures that overall amounts match. 

No

Unit Price

Quantity

Amount

Subtotal

Comments

1

51.93

5

259.65

259.65

Cycle fee for the next period (paid upfront for license-based subscriptions).

2

-3 057.17

1

-3 057.17

-3 057.17

If all prorated charges are added together from Microsoft reconciliation file (22 614.68 + 33.5 – 25 705.35 = - 3 057.17 EUR) amounts match calculated amount in AppXite Platform.

As can be seen AppXite Platform ensures that pro-rated charges are aggregated and shown in user friendly manner and data can be used for upload into ERP systems.

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