How to fit prorated billing into your subscription business
As much as usage-billing is a highly beneficial model, businesses can only reap off it if they implement it correctly. Here is our comprehensive guide to acing on prorated billing:
To be fair to your business and your clients, you must be explicit and unambiguous about how you prorate your prices. You want to ensure your invoices are always accurate and that your consumers know precisely what they're being charged for.
Regularly collect recurring payments.
Prorated bill collections can be difficult and stressful. You have more invoices and numerous payment options to choose from. Ensure you regularly collect your payments to avoid a backlog. With modern payment technologies, you can efficiently automate your prorated bill collections.
Adjust offer to meet customer demand
Watch out for customer trends and vary your offers as necessary. You have to stay ahead of customer demand to ensure that you meet them halfway whenever their usage changes.
Set up a smart refund policy
When subscribers cancel or downgrade their subscription in the middle of a monthly billing cycle, most of them expect to access your product until the end of the cycle rather than receive a refund. This means you'll have more money in the bank, and almost all your users will be satisfied. You can always opt to overlook your policy and provide a refund to the few who complain. Also, quarterly or annual billing typically requires a refund policy that ensures consumers are treated fairly.
Focus on accurate revenue recognition
Once you have collected all your bills, ensure that the revenue is accurately recognized. When creating a subscription, be mindful of the dates you enter so you can appropriately capture how proration affects income. Effectively recognizing your bills ensures your business does not miss out on payments or run into erroneous billing.