How calendar billing works
You choose one billing day for everyone. A customer who signs up on any other day gets a short first period, called a stub, that runs from their signup date to the next billing day. After that, every period is a full month starting on the billing day.
The stub needs a rule. The fairest is to prorate it: charge the monthly price times the days in the stub, divided by the days in the month. Some businesses charge a full month for the stub, and some give it away and start billing on the first aligned day.
The alternative is anniversary billing, where each customer renews on the day they signed up. It needs no stub, but invoices go out every day of the month instead of on one day.
stub charge = monthly price × days in the stub ÷ days in the month
Worked example
A gym management app bills everyone on the 1st at $60 a month. A customer signs up on September 21. September has 30 days, and the stub from September 21 to 30 covers 10 of them.
- Stub, September 21 to 30: $60 × 10 ÷ 30
- $20.00
- October 1: first full month
- $60.00
- Billed by October 1
- $80.00
With anniversary billing the same customer would pay $60 on September 21 and $60 again on October 21.
Why calendar billing matters
Many business customers want every vendor invoice on the same day so their accounts team can approve them together. Calendar billing gives them that, and gives you one billing run a month to check instead of thirty.
It also lines revenue up with calendar months, which makes monthly reporting simpler. The price is the stub: every new customer's first invoice is an odd amount that has to be explained.
Common mistakes
- Charging a full month for a three day stub A customer who signs up on the 28th and pays a whole month for 3 days will ask why. Prorate the stub, or state the rule at checkout.
- Picking the 29th, 30th or 31st Not every month has them. A billing day from 1 to 28 exists in every month.
- Forgetting subscriptions that drift A pause or a change of billing day can move a subscription off its day. It needs another short period to line back up, charged by the same rule.