Spotlight: Prorated Billing
Prorated Billing with TimelyBill
What is Proration or Prorated Billing?
Prorated Billing is a way of creating fair charges to reflect changes mid-billing period. For example, if a customer joins in the last half of the billing period, a prorated billing system would only charge for the half that the customer used the service rather than the entire billing period.
Example of Proration in Telecom
Imagine you have a monthly phone plan that costs $50 per month, and your billing cycle starts on the 1st and ends on the 30th of each month. If you activate this plan on the 10th of the month, you've used the service for only a portion of the billing cycle.
To apply prorated billing in this context:
- The total monthly cost of the phone plan is $50.
- The number of days you've used the service in the current billing cycle (from the 10th to the 30th): 21 days.
- The total days in the billing cycle (30 days in this case).
Prorated cost = (21 / 30) * $50 = $35
In this scenario, your prorated cost for the first month of using the phone plan would be approximately $35 instead of $50, reflecting that you only used the service for 21 days out of the 30-day billing cycle.
Proration is a fair way to bill customers based on their actual usage during a specific billing period, particularly when their usage doesn't cover the entire billing cycle. This approach is often used by telecom companies, cable providers, and other subscription-based services to ensure accuracy in billing.
How does TimelyBill use Prorated Billing?
TimelyBill’s billing and invoice generation system calculates a customer's recurring and non-recurring charges, taxes, discounts, and more. If a company chooses to opt into proration, TimelyBill can quickly and easily account for day-by-day payment.
Benefits of Prorated Billing with TimelyBill
- TimelyBill handles the proration for you.
- Allows customers to join a subscription without hassle.
- Customers are more likely to continue service if they're charged for only what they use.
- Creates a stronger relationship between service and consumer.
Read more about TimelyBill's billing management on our website.
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