Plan price change: 3 proration cases to check first

• Record the old price, new price, change date, and term end date.
• Confirm the setting that controls proration.
• Check the price behind each credit.
• Explain each credit and debit before accepting the total.

The new price may not start on the first day of a new period. Part of the term can be billed at the old price and part at the new one.

This post is for the owner or manager who sets the new price and checks the invoices that follow it. Prorations deserve a check before the new price goes live. The three cases below are situations to look for. Each one uses an example from Stripe's documentation on prorations . Those examples describe how Stripe's billing system calculates amounts. They do not describe what your agreement requires, and your billing tool may work differently. Treat the examples as a list of questions to put to your own setup.

Before you read on, write down four facts about the change: the old price, the new price, the date the change takes effect, and the date the current term ends. You need all four to check any invoice that follows. For a related check, see maintenance agreement proration inputs .

A proration is an amount that reflects partial use of a subscription. Stripe's documentation on prorations describes the customer as charged a percentage of a subscription's cost to reflect partial use, and says prorations are the most complex aspect of changing existing subscriptions.

In plain terms, if the price changes partway through a term, the time before the change and the time after it can be billed at different amounts. The examples in the next three sections show how these changes can look.

Before you change the price, settle four things: the rule for partial periods, the four facts, who approves the change, and what the customer will be told.

Start with the rule. Decide, in writing, whether the change is prorated. If it is, decide which price applies to the part of the term before the change and which applies to the part after it. The first case depends on this decision, so make it first.

Next, fill in the four facts. Write each one as a plain statement, such as the old price, the new price, and the two dates, so there is no room for guessing later. Store them where the people who check invoices can find them.

Then decide who approves the change. It helps to name one person who signs off on the change and to keep that approval in writing, with the date.

Finally, decide what the customer will be told and when. The customer should know the date the change takes effect and how the first invoice after that date will be worked out. Do not leave the customer to work that out from an invoice alone.

Stripe's documentation includes a scenario in which a 10 USD monthly subscription is upgraded to 20 USD with the proration_behavior set to none for 10 days. The scenario is useful because it makes you ask a basic question first: will this change be prorated at all? If you do not know the answer, you cannot check the invoice.

The setting in that example is named proration_behavior. Your billing tool may have a setting that controls the same thing, or it may handle the choice another way. Find out which before the change takes effect. Check your tool's documentation for the setting that controls whether a mid-term price change is prorated, and do not guess from the name of a setting.

Think about the value, too. Write down the value of your setting and the length of your period in the same plain way you would write any other fact.

Once you know the setting, write the rule down before the change. Say whether the days before the change and the days after it are prorated, and which price applies to each part of the term. A written rule gives you something to check each invoice against, so you are not relying on memory.

Tell the customer the rule too. A short note that gives the date the change takes effect and explains how the next invoice is calculated can prevent questions later. Keep a copy of that note with the agreement.

Under Stripe's classic billing mode , which the documentation writes as billing_mode=classic, the proration calculation logic creates a credit based on the current price, even though the customer never paid the 20 USD monthly rate.

The same page shows what that can look like on an invoice. The latest invoice credits a third of the month for 20 USD (-6.67 USD), even though the customer never paid for the price_20_monthly price.

A credit is easy to accept without a second look. Before you accept one, ask two questions. Which price is the credit based on? Did the customer actually pay that price for that part of the term? If the answer to the second question is no, the credit needs a closer look.

The gap between those two answers is the thing to look for. If the price in a credit line is not a price the customer paid for that period, the line needs an explanation before you accept it. Ask your billing provider how a credit line is worked out, and get the answer in writing. If the answer depends on a setting, write that setting down next to the rule you chose in the first step.

If your tool is Stripe, confirm which billing mode it uses before you rely on any credit amount.

If you find a credit like this, do not fix it quietly. Write down the line, the amount, the price it uses, and the reason you think it is wrong. Then raise it with your billing provider and with the customer, using the same written record. A correction that is explained in writing is easier to check than one made without a note.

In one of Stripe's examples , the credit and the debit cancel out, so the invoice total is 0 USD.

In that case, the latest invoice credits a third of a month for the 10 USD monthly price billed on April 1 (3.33 USD) and debits a third of the month for the 10 USD price (3.33 USD).

A total of 0 USD is easy to read past. It does not show what was credited, what was debited, or which dates each amount covers. Check each credit and each debit on its own. For each line, note the price it uses, the part of the term it covers, and the amount.

Equal and opposite amounts are a reason to slow down, not a reason to stop. The sensible response is to confirm the lines are right for your agreement and then to record that the total is zero for a known reason.

When you see a pair like this, ask what each line is for. If you can explain both lines from your written rule, record that explanation next to the invoice. If you cannot, treat the pair as an open question and do not close it until you can.

Illustrative example: checking a zero total

An illustrative invoice has a credit of 10 USD and a debit of 10 USD. Subtract the credit from the debit: the total is 0 USD. Before accepting it, check the price and period behind each line. Matching amounts explain the total; your written rule explains whether the lines belong there.

The change date is the first fact to confirm, because the other checks depend on it. The third case shows why. There, the credit is for a third of a month for the 10 USD monthly price billed on April 1. If the date is wrong, the part of the term each line covers is wrong too.

Write the change date in the same form on the agreement, the customer note, and the internal record. Use one format, such as a full calendar date, so no one has to guess whether a date in one document means the same day as a date in another.

Then check the end of the current term. The end date tells you where the term stops, which you need in order to read any line that covers days near the end. If the change falls on the first or last day of a term, write that down, because a line may cover very little time. See also maintenance billing calendar dates .

Read a prorated invoice one line at a time, matching each line to one part of the term and one price. Do not start with the total.

Start by finding the period each line covers. The Stripe examples describe lines for a third of a month, so a single line may cover only part of a billing period. Write that fraction next to the line.

Next, check whether each line is a credit or a debit. In the Case 2 example, the credit is shown as -6.67 USD. Note which lines are credits and which are debits before you add anything up.

Last, add the lines up. If the total does not match what you expected, go back to the first two steps. Do not accept an invoice you cannot explain line by line.

Once every line is explained, compare the invoice with the agreement's wording on price changes. Note any place where the invoice and the agreement do not match, and settle that point before the next invoice is issued. A small difference that is written down is easier to fix than one found later.

If your billing tool lets you preview an invoice, preview one for the change before it takes effect, and compare it with the four facts you wrote down.

Related guides: Used oil rules: 6 checks before you price an oil change · Flat-rate price updates: 4 apps and edit rules · Price book amounts: 5 checks before you save a price .

Ask your billing provider these questions before the first invoice after the change is issued.

Does a mid-term price change create a proration, and which setting controls that?

Confirm whether your tool prorates the change and record the setting that controls it.

Which price does each credit line use?

Check the price behind the credit against the price the customer paid for that period.

Which billing mode or calculation method applies to price changes in this tool?

Ask your provider to identify the method used for your agreement.

Can I preview the invoice before the change takes effect?

Ask whether your billing tool offers an invoice preview for the change.

How are credits and debits labeled on the invoice?

Confirm which labels identify credits and debits before adding the lines.

Where is the record of each change kept, and who can read it?

Keep the record with the agreement where the people checking invoices can read it.

Write down each answer with the date you received it. A verbal answer is easy to forget, and the invoice may be checked later.

Keep a written record of the rule, the four facts, and each invoice that follows the change, so you can check later what was billed and why.

Store the record with the agreement, not in a place that only one person can open. Note the date you made the decision and who made it. If a credit or debit later needs explaining, you will have the rule you chose and the facts you recorded. That record is the difference between answering a question from notes and answering it from memory.

Review the record once a term, even when nothing has gone wrong. A short review shows whether the written rule still matches the invoices, and whether any setting has changed since you wrote the rule down.

1. The proration rule. Confirm whether the change is prorated, and that the written rule matches your setting (Case 1).
2. The price behind each credit. Confirm which price a credit uses, and whether the customer paid that price for that part of the term (Case 2).
3. Totals of 0 USD. Check each credit and debit on its own, not only the total (Case 3).
4. The prices and dates. Confirm the old price, new price, change date, and end of the current term against the agreement and the invoice.