Prorated Charges for Addon Subscriptions

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

Summary:

  1. Microsoft aligns addon subscription billing cycle with parent subscription billing cycle.
  2. Microsoft includes charge line in reconciliation file for each different quantity of licenses used for # of days.
  3. Microsoft recalculates Unit Price for prorated charges based on # of days licenses were used.
  4. Microsoft calculates Amount and Subtotal columns based on full Unit Price (no rounding applied).
  5. Unit Price shown in reconciliation file is with two digits after comma (remaining digits after comma are cut off).
  6. 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.
  7. At current moment Microsoft calculation method for prorated charges and rounding principles is not documented by Microsoft in CSP documentation.
  8. Reconciliation data from Microsoft cannot be automatically imported into most ERP systems that as a default setting calculate invoice amount by multiplying Unit Price with Quantity.
  9. AppXite Platform currently follows same calculation principles as Microsoft.

Scenario: 

Customer has purchased addon offer Microsoft 365 Audio Conferencing. Addon offers inherits parent subscription billing cycle starting from next billing cycle.

For example, addon subscription purchased on 14.04.2021. with parent subscription that has a billing cycle date 24 would also from next month be changed and follow the same billing cycle. So with next month Cycle Fee period for addon subscription will be 25.04.2021. – 24.05.2021.

Example case with corresponding Charge Start and Charge End Dates. 

No

Offer Name

Charge Start Date

Charge End Date

Charge Type

1

Microsoft 365 Audio Conferencing

4/14/2021

4/24/2021

Prorate fees when purchase

2

Microsoft 365 Audio Conferencing

4/25/2021

5/24/2021

Cycle fee

3

Office 365 E1

4/25/2021

5/24/2021

Cycle fee

Change of Charge Start Date and Charge End Date impacts also prorated charge calculation. 

Charge Start Date and Charge End Date for line 1 is 25.04.2021. – 24.05.2021. thus it has full list price of 35.26 EUR multiplied by Quantity.

Charge Start Date and Charge End Date for line 2 is 14.04.2021. – 24.04.2021. This charge is prorated to follow parent subscription cycle. In order to determine Unit Price for line 2, Microsoft will divide addon offer price with # of days in the month and then multiply by # of days in use i.e., 35.26 / 31 * 11 = 12.5116129 EUR.

Important to note: Microsoft uses full Unit Price to calculate Amount and Subtotal columns (12.5116129 x 10 = 125.12 EUR) and cut off all digits up to last two. This can lead to a scenario where customer multiplies Unit Price with Quantity and gets slightly different result compared to Amount and Subtotal columns - 125.12 EUR vs 125.10 EUR.

Below are lines from Microsoft reconciliation file regarding addon subscription:

No

Unit Price

Quantity

Amount

Subtotal

Comments

1

35.26

10

352.6

352.6

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

2

12.51

10

125.12

125.12

Charges for period from 14.04.2021. until 24.04.2021. for 10 licenses.

At the current moment AppXite Platform follows same logic as Microsoft.

To improve user experience AppXite will extend Unit Price to five digits after comma in AppXite Platform reconciliation file. Amount column will have invoice amount with two digits after comma rounded down. This will also resolve data imports to ERP systems.

Important to note: There are slight differences with Charge Types naming between Microsoft and AppXite Platform. As can be seen in Microsoft reconciliation file prorated add-on subscription upon purchase will have charge type "Prorate fees when purchase" while in AppXite Platform billing engine charge type will be "Purchase Fee".

No

Offer Name

Charge Start Date

Charge End Date

Charge Type

1

Microsoft 365 Audio Conferencing

14.04.2021.

24.04.2021.

Purchase Fee

2

Microsoft 365 Audio Conferencing

25.04.2021.

24.05.2021.

Cycle fee

3

Office 365 E1

25.04.2021.

24.05.2021.

Cycle fee

Extensive overview of naming between charge types is available in the article: Charge-Types 

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