Proration Effects with Plan Changes

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Overview
Examples of Proration Effects with Plan Changes
1. Changing to a More Expensive Plan
2. Changing to a Less Expensive Plan
  1. Single Line Downgrade Use Cases
    1. Net Negative Proration Action: Option 2 Produce Corresponding Cash Credits (FULL)
    2. Net Negative Proration Action: Option 4 Produce Cash Credit for Net Negative Amount (Partial)
Credit and Refund Behavior Associated with Proration

Overview

When a customer subscribes to a new plan, cancels a plan, replaces a plan or changes plan units in the middle of a billing cycle, you can select one of the following proration options for the assignment scope:

Assign on Anniversary
Assign Immediately
Assign in Future

Note: When choosing Assign Immediately, you can delay the resulting invoice until the next billing date by setting the Proration Invoice Timing field within the plan's Billing & Invoicing tab.

When choosing to assign immediately or in the future, different proration occurs, depending on the selected proration option:

Client Default
None
Full Proration
Charge Only Proration
Credit Only Proration

Note: The Client Default option defaults to client proration parameter settings.

Examples of Proration Effects with Plan Changes

The tables below provide examples of proration periods and resulting charges or credits. Actual proration periods and resulting charges or credits vary depending on the plan type, billing intervals, and whether you are adding, canceling, or changing plans.

Changing to a More Expensive Plan

This example describes the different proration types and resulting charges or credits that would exist if a customer who is billed on the 15th of every month was switched from monthly Plan A to monthly Plan B on 4/27/15.

Plan A's monthly recurring charges are $30.
Plan B's monthly recurring charges are $60.

Proration Type	Plan A: Credit Amount Unused service: 4/27 through 5/14	Plan B: Charge Amount New service: 4/27 through 5/15	Prorated Total As of 4/27	Charge for Plan B 5/15 Invoice	Charge for Plan B on 6/15 Invoice and All Future Invoices for the Subscription
None	None	None	$0 balance	$60	$60
Full proration	$18 ($1 daily cost x 18 days of unused service)	$36 ($2 daily cost x 18 days of new service)	$18 charge ($36 charge - $18 credit)	$60	$60
Charge only proration	None	$36 ($2 daily cost x 18 days of new service)	$36 charge	$60	$60
Credit only proration	$18 ($1 daily cost x 18 days of unused service)	None	$18 credit (Applied to 5/15/15 invoice.)	$42 ($60 charge - $18 credit)	$60

Changing to a Less Expensive Plan

Plan A's monthly recurring charges are $30.
Plan B's monthly recurring charges are $60.

Proration Type	Plan A: Credit Amount Unused service: 4/27 through 5/14	Plan B: Charge Amount New service: 4/27 through 5/15	Prorated Total As of 4/27	Charge for Plan A 5/15 Invoice	Charge for Plan A 6/15 Invoice	Charge for Plan A on 7/15 Invoice and All Future Invoices for the Subscription
None	None	None	$0 balance	$30	$30	$30
Full proration	$36 ($2 daily cost x 18 days of unused service)	$18 ($1 daily cost x 18 days of new service)	$18 credit ($18 charge - $36 credit applied to 5/15/15 invoice.)	$12 ($30 charge - $18 credit)	$30	$30
Charge only proration	None	$18 ($1 daily cost x 18 days of new service)	$18 charge	$30	$30	$30
Credit only proration	$36 ($2 daily cost x 18 days of unused service)	None	$36 credit (Applied to 5/15/15 invoice.)	$0 ($30 charge - $30 credit = $6 credit balance applied to 6/15/15 invoice.)	$24 ($30 charge - $6 credit)	$30

Single Line Downgrade Use Cases

Single line downgrades are available only when the Enable Single Line Upgrade hidden parameter is enabled. When you perform a single line downgrade, Aria applies Last In, First Out (LIFO) proration exclusively: the most recent invoice is evaluated first when calculating the proration credit, then earlier invoices are evaluated in reverse chronological order as needed.

Notes:

For proration triggered by a plan replacement, Aria uses existing non-LIFO proration behavior. A single line downgrade that follows a plan replacement uses LIFO proration. A single line upgrade that follows a plan replacement uses existing upgrade behavior.
Contact Aria to set the hidden parameter Enable Single Line Upgrade to "true."

The following examples show a customer billed on the 1st of each month who single line downgrades from 100Min Call & Text ($200/mo) to 50Min Call & Text ($100/mo) on 10/15, with 15 days remaining in the billing period. Because Invoice #200 (10/1) is the most recent invoice, Aria evaluates it first per LIFO. In this example, the credit from Invoice #200 covers the full proration amount, so Invoice #100 (9/1) is not evaluated.

Net Negative Proration Action: Option 2 Produce Corresponding Cash Credits (FULL)

Date	Transaction Type / MPI / Action	Charge Amt.	Applied Payment	Cash Credits Issued	Cash Credits Applied	Cash Credits Unapplied	Refund
9/1	Invoice #100—100Min Call & Text	$200	($200)
10/1	Invoice #200—100Min Call & Text (most recent; evaluated first per LIFO)	$200	($200)
10/15	Single line downgrade to 50Min Call & Text ($100/mo)
10/15	Invoice #300—50Min Call & Text	$50*
	Cash Credit (LIFO: from Invoice #200)—successful refund			$100	($50)		($50)
10/15	Invoice #300—50Min Call & Text	$50
	Cash Credit (LIFO: from Invoice #200)—failed refund			$100	($50)	$50

* Needs to be paid with a new payment (existing process). NOTE: Refund or auto-collect (if set as TRUE) will run only for the net (any excess credit will be refunded, any excess charge will be collected).

Net Negative Proration Action: Option 4 Produce Cash Credit for Net Negative Amount (Partial)

Date	Transaction Type / MPI / Action	Charge Amt.	Applied Payment	Cash Credits Issued	Cash Credits Unapplied	Refund
9/1	Invoice #100—100Min Call & Text ($200/mo)	$200	($200)
10/1	Invoice #200—100Min Call & Text (most recent; evaluated first per LIFO)	$200	($200)
10/15	Single line downgrade to 50Min Call & Text ($100/mo)
10/15	Invoice #300—50Min Call & Text	$50	($50)*
	Cash Credit (LIFO: from Invoice #200)—successful refund			$50		($50)
10/15	Invoice #300—50Min Call & Text	$50
	Cash Credit (LIFO: from Invoice #200)—failed refund			$50	$50

* Needs to be paid with a new payment (existing process).

Credit and Refund Behavior Associated with Proration

In any of the above proration scenarios, the following credit and refund behavior applies:

A service credit resulting from proration is assigned to the Master Plan Instance responsible for the proration.
A cash credit resulting from proration is assigned to the account.
A refund of electronic payment/refund reversal resulting from proration is applied to the method of payment associated to the billing group for the Master Plan Instance if, and only if, the payment associated to the original invoice has been applied to one invoice.
A refund of a cash credit amount can be configured so that when a prorated action (e.g., cancellation or downgrade) that results in net negative charges occurs, the account holder will be issued service credit, cash credit, refund or discard.
In addition, for cash refunds on net negative amounts can be configured to automatically generate a cash refund on a fully paid invoice. The behavior is dependent on client parameter settings.

Proration on net charges options

The client parameter Proration on net charges options (under Configuration > Billing > Invoice Settings) allows you to specify which of these amounts to deduct from the charges before a proration credit is calculated:

Charges, Tax, Coupon-based credits, and Discounts (default); or
Charges, Tax, Coupon-based credits, Discounts, and all Service Credits.

Example: A customer signs up for a monthly plan on 1 October 2020 and a service credit is applied to the invoice. Then the customer cancels on 10 October 2020. The prorated refund based on 10 days of the subscription will be calculated based on gross or net charges as described in the sample scenarios below:

Parameter Setting	Monthly Charge	Service Credit	Tax	Prorated refund calculated based on:
1. Charges, Tax, Coupon-based credits, and Discounts (default)	$50	$30	$3.50 (7% of the $50 charge)	Gross charges: $53.50 = ($50) + ($3.50) = (monthly charge) + (tax)
2. Charges, Tax, Coupon-based credits, Discounts, and all Service Credits	$50	$30	$1.40 = $3.50 - $2.10 = (7% of the $50 charge - 7% of the service credit)	Net charges: $21.40 = ($50-$30) + ($1.40) = (monthly charge - service credit) + (tax)

Refund for Proration Credit Action

The client parameter Refund for Proration Credit Action (via Configuration > Payments > Payment Settings) makes it possible to configure Aria to automatically refund net negative charges resulting from the proration of plan cancellations and downgrades. This automated refund for cash credit functionality only works when this parameter is enabled in tandem with the client parameter, Net-Negative Pro-Ration Action (Configuration > Billing > Invoice Settings).

For example, when configured, the client parameter Refund for Proration Credit Action determines whether an eligible refundable payment should be issued an automated cash credit refund for "Refund for Cancellation" use case or "Refund for Cancellation or Downgrade" use cases. Ellligible payments are those associated with a fully paid invoice. If there is more than one payment applied to an invoice or if an attempted refund fails, then Aria will not issue an automated cash credit refund.

With the "Refund for Cancellation or Downgrade" option, supported downgrade use cases include: unit of subscription change, a rate tier change, or a subscription change. This parameter acts as an extension of cash credit options "Produce Cash Credit for Net Negative Amount" and "Produce Corresponding Cash Credit" defined by the Net Negative Pro-ration Action client parameter.

IMPORTANT: Be aware that only one-time, fully paid invoices are eligible for an automated cash credit refund. If a customer made multiple payments or used multiple payment methods to pay an invoice, Aria will not process the cash credit. Instead, Aria will display the error message, "Automated refund is not issued for invoice [invoice no] due to payment is ineligible for automated refund or the original payment method is invalid". If a refund attempt fails, Aria issues a prorated cash credit to the account holder.

Values: No Refund (default), Refund for Cancellation, Refund for Cancellation or Download

When the client parameter is set as 'Refund for Cancellation', then refund will be generated only while doing a plan cancellation.
If the option 'Refund for Cancellation or Downgrade' is set, then auto refund will be generated while doing plan cancellation, replacement, or plan update.

Once set up, an automated cash credit refund can occur upon user actions in the Plans screen for Remove Plan, Replace Plan, or Change Plan Units that could cause a net negative charge upon proration. In the Aria interface, you will see automated cash credit refund transactions in the Refunds (Accounts > [select account] > Payments & Credits) and Transactions (Accounts > [select account] > Statements & Invoices) screens in the table descriptions. After a refund is issued, an uneditable (read-only) "Plan cancellation or downgrade automated refund" reason code is ascribed to the transaction that describes the cause of the refund. The reason can be seen in the transaction data tables and in account overview. The reason code is listed in Finance > Reason codes.

For automated refund:
Refund for Proration Credit Action: Use options "Refund for Cancellation" or "Refund for Cancellation or Downgrade"
Net-Negative Proration Action values: Use options "Produce Cash Credit for Net Negative Amount" or "Produce Corresponding Cash Credit"

Downgrade Use Cases

Net Negative Proration Action: Option 2 Produce Corresponding Cash Credits (FULL)

Date	Transaction Type / MPI / Action	Charge Amt.	Applied Payment	Cash Credits Issued	Cash Credits Applied	Cash Credits Unapplied	Refund
10/1	Invoice#123 - 100Min Call & Text	$200	($200)
10/15	Downgrade to 50Min Call & Text ($100/mo)
10/15	Invoice #234 - 50Min Call & Text	$50*
	Cash Credit - successful refund		;	$100	($50)		($50)
10/15	Invoice #234 - 50Min Call & Text	$50
	Cash Credit - failed refund			$100	($50)	$50
* Needs to be paid with a new payment (existing process). NOTE: Refund or auto-collect (if set as TRUE) will run only for the net (any excess credit will be refunded, any excess charge will be collected).

Net Negative Proration Action: Option 4 Produce Cash Credit for Net Negative Amount (Partial)

Date	Transaction Type / MPI / Action	Charge Amt.	Applied Payment	Cash Credits Issued	Cash Credits Unapplied	Refund
10/1	Invoice#123 - 100Min Call & Text ($200/mo)	$200	($200)
10/15	Downgrade to 50Min Call & Text ($100/mo)
10/15	Invoice #234 - 50Min Call & Text	$50	($50)*
	Cash Credit - successful refund			$50		($50)
10/15	Invoice #234 - 50Min Call & Text	$50
	Cash Credit - failed refund			$50	$50
* Needs to be paid with a new payment (existing process).

Cancellation Use Cases

Net Negative Proration Action: Option 2 Produce Corresponding Cash Credits

Date	Transaction Type / MPI / Action	Charge Amt.	Applied Payment	Cash Credits Issued	Refund
10/1	Invoice#123 - 100Min Call & Text	$200	($200)
10/15	Plan cancelled
	Cash Credit - successful refund			$100	($100)
	Cash Credit - failed refund			$100	*
* Cash credits remain unapplied until next invoice or until it's applied.

Net Negative Proration Action: Option 4 Produce Cash Credit for Net Negative Amount

Date	Transaction Type / MPI / Action	Charge Amt.	Applied Payment	Cash Credits Issued	Refund
10/1	Invoice#123 - 100Min Call & Text ($200/mo)	$200	($200)
10/15	Plan cancelled
	Cash Credit - successful refund			$100	($100)
	Cash Credit - failed refund			$100	*
* Cash credits remain unapplied until next invoice or until it's applied.