How proration works
When a subscription changes partway through a period, the customer has already paid for time on the old price that they will no longer use, and owes for the time left on the new price. Proration settles both with the same fraction: the days remaining divided by the days in the period.
The unused part of the old price becomes a credit. The remaining part of the new price becomes a charge. The customer pays the difference, either straight away or on their next invoice, depending on how you set it up.
The same fraction applies to a customer who starts partway through a calendar billed period: they pay only for the days they get.
fraction = days remaining ÷ days in the period
net due = (fraction × new price) − (fraction × old price)
Worked example
A customer pays $30 a month and upgrades to the $60 plan on June 16. June has 30 days, and 15 of them remain.
- Fraction of the period left: 15 ÷ 30
- 0.5
- Credit for unused time on the old plan: 0.5 × $30
- −$15.00
- Charge for the rest of June on the new plan: 0.5 × $60
- $30.00
- Net due for the upgrade
- $15.00
From July 1 the customer pays the full $60 a month.
Why proration matters
Without proration there are two bad options: make the customer wait until the next period to upgrade, which delays revenue, or charge the full new price, which charges them twice for the same days. Proration lets customers change plans whenever they want and pay a fair amount.
It also removes a reason to write to support. A clear preview of what a change costs, shown before the customer confirms it, answers the question most upgrade emails ask.
Common mistakes
- Prorating by month instead of by day Months have 28 to 31 days. Counting days keeps the credit and the charge exact.
- Refunding downgrades by reflex A downgrade usually produces a credit on the next invoice, not cash back. Decide your rule before the first customer asks.
- Not showing the amount first Customers accept a prorated charge they saw before confirming. A surprise line on the next invoice becomes a dispute.
- Forgetting annual plans The fraction is the same on a $1,200 annual plan, but a change halfway through the year moves hundreds of dollars.