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How do I generate a prorated invoice for a subscription with a custom initial term period?

Question: A subscription has a custom Initial Term in Days (less than 1 year), however when the subscription is billed a charge for the full annual amount shows up on the Invoice. Why is this happening?

 

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Zuora Staff

Re: How do I generate a prorated invoice for a subscription with a custom initial term period?

Ideal State: To generate a prorated Invoice for the custom Initial Term period, with the option to renew to a ‘normal’ annual subscription.

 

The invoice behavior in this example is dependent on two things:

  • ‘Invoice Past End-of-Term when Auto-Renew is OFF?’ setting marked ‘Yes’
  • Date selected for the Bill Run Target Date

 

I’ve ran two parallel tests below to show how these two variables impact the invoice behavior.

 

Test 1: Undesired Behavior (Subscription: A-S00000041)

Subscription Details:

  • Initial Term: 153 days (3/23/18 – 8/23/18)
  • Renewal Term: 12 months (8/23/18 – 8/23/19)
  • Auto Renew: No

Timing & Frequency of Charge:

  • Trigger Condition: Upon Contract Effective
  • End Date: Align to Subscription End Date
  • Billing Period: Annual
  • Billing Period Alignment: Align to Term Start

 

Sub41 - N - 153 days - TD 3_23.png

 

Test 1: Invoice Behavior (INV00000102 & INV00000104)

Invoice #1: INV00000102

  • Target Date: 3/23/2018
  • Total: $100 (annual charge, not prorated)

Invoice41 PT 1 - N - 153 days - TD 3_23.png

 

Invoice #2: INV00000104

  • Target Date: 8/24/2018
  • Total: -$58.08 (proration credit)

 

Invoice41 PT 2 - N - 153 days - TD 8_24.png

 

Reason for Behavior:

 

‘Invoice Past End-of-Term when Auto-Renew is OFF?’ setting is marked ‘Yes’.

This setting allows you to invoice past End-of-term, so in this case an invoice is generated for  the annual charge from 3/23/2018 – 3/22/2019. 

 

However since the subscription is not renewed by the next bill cycle date following the term-end, a proration credit (-$58.08) is issued for the service period that was billed past End-of-Term, in this case 8/23/2018 – 3/22/2019.

 

More information on Zuora’s Default Subscription Settings: here

 

Target Date

The Invoice Target Date is used to determine which charges to bill. All charges to bill as of or prior to the target date are included in the bill run.

 

Because Core Users is an annual product, Zuora attempts to bill for the annual amount if the Bill Run Target Date is set before the Initial Term Period end (8/23/2018). In this scenario, if you complete the subsequent Bill Run with a target date of the first day of the renewal term (Initial Term + 1 day) on 8/24/2018, a proration credit of -$58.08 is issued to correct itself.

 

Test 2: Desired Behavior (Subscription: A-S00000042)

Subscription Details:

  • Initial Term: 153 days (3/23/18 – 8/23/18)
  • Renewal Term: 12 months (8/23/18 – 8/23/19)
  • Auto Renew: No

Timing & Frequency of Charge:

  • Trigger Condition: Upon Contract Effective
  • End Date: Align to Subscription End Date
  • Billing Period: Annual
  • Billing Period Alignment: Align to Term Start

 

Sub42 - Y - 153 Days - TD 8_24.png

 

Test 2: Invoice Behavior (INV00000103)

Invoice: INV00000103

  • Target Date: 8/24/2018
  • Total: $41.92 (proration)

 

Invoice42 P - Y - 153 - TD 8_24.png

 

Reason for Behavior:

 

If you set the Bill Run Target Date for the first day of the renewal term (8/24/2018) or after, Zuora will take into account the non-annual term and the Invoice will reflect the prorated amount of $41.92 (the charge that you expect, for the period you expect).

 

Honor Student

Re: How do I generate a prorated invoice for a subscription with a custom initial term period?

I have this same issue - trying to invoice a pro-rated first year annual subscription.  However, the solution of setting my target date to a future date (after the renewal date) is not an option. My billing customer has multiple subscriptions with effective start dates in the future.  If I process a bill run for this client with the future target date in order to pick up the pro-ration correctly then it will also invoice for subscriptions that should not be included yet.  

Zuora Staff

Re: How do I generate a prorated invoice for a subscription with a custom initial term period?

Hi @nVoq4775 -

 

If this is the case, you can set the 'Invoice the Subscription Separately' option for that subscription to 'Yes'. When you complete the Bill Run for that customer, ensure the Bill Run Processing Rule 'Auto-Post documents upon completion of the Bill Run' is set to 'No'.

 

When the draft invoices for that account are generated, you can post the Invoice for that subscription once you have confirmed the results are as you expect. As for the other draft invoices that are not ready to be billed yet, you can can cancel those out. You also have the option to leave them in draft and they will be appended with an updated amount when you do the next Bill Run.