Prorate partial billing periods for recurring billing

Sage Intacct can automatically calculate prorated prices for recurring billing when a contract line's start and/or end date results in a partial billing period. For monthly billing, if the contract line also uses the straight line recognition method and the revenue start and end dates are the same as the contract line, the revenue schedule will match the billing schedule.

About partial billing period proration

When you add a new contract line to a contract, you can indicate whether or not Intacct should prorate the first and/or last billing period amount if the contract line start and end dates result in a partial period.

The proration calculation for monthly billing periods is:

The proration calculation for quarterly billing periods is:

The proration calculation for annual billing periods is:

Note the following behavior:

• You can prorate partial periods with either fixed price or variable quantity contract lines.
• The Duration (in periods) is calculated as follows:

  Number of full periods in contract line term + (number of days in partial period / number of days a billing period). If there are 2 partial periods, then the second partial period is also calculated and added to the duration.

  This value is calculated with a precision of 10 and rounded to 2 decimal places in the display.

• In order for the revenue schedule to match the billing schedule when you use Prorate partial periods, the following criteria must be met:
  • The recognition method must = Straight line
  • The revenue start and end dates must = the contract line start and end dates
• If you’re also subscribed to Digital Board Book: The standard MRR calculation doesn’t change if you use the prorate partial periods function, so your MRR amounts might differ from the billing schedule.

Prorate first and/or last partial periods for a new contract line

You can use this function to prorate the first and last partial periods for termed contract lines. You can only use this function to prorate the first period for evergreen contract lines.

To prorate partial periods for a new contract line:

1. Open the applicable contract in Edit mode.
2. Select Add located above the top-left corner of the Contract lines table.

   The Contract line popup window appears.

3. Use the Item dropdown list to select the desired item.
4. Enter the applicable contract line Start and End dates that result in a partial first and/or last billing schedule period.
5. Use the Billing method dropdown list to select either Fixed price or Quantity-based. If you choose Quantity-based, select Variable as the Quantity type.
6. Use the Flat/fixed amount frequency dropdown list to select Include with every invoice.
7. Use the Billing frequency dropdown list to select the interval in which the billing should recur.
8. Select the Prorate partial periods checkbox.
9. Do one of the following:
   • Use the Calculator fields to calculate the amount for each invoice.
   • Enter the amount for each invoice in the OR Enter amount field.

10. If you want the revenue schedule to equal the billing schedule, optionally select a Revenue template with Recognition method = Straight line and enter the same dates used for the contract line start and end dates for the Revenue start and end dates.

11. Select Post, Save, or Draft, as applicable.
12. In the Contract lines grid, select the contract line, select Show details, and then select View schedule under Billing schedule.

    If there’s a partial first period, Intacct schedules the first period to bill on the contract line start date. It shows the calculation details for the partial periods in the Computation memo field.

Prorate the partial period for an upgrade or downgrade to an existing contract line

This section is only applicable to termed contracts. A termed contract has both start and end dates.

You may encounter situations where a customer wants to upgrade or downgrade a contract line in the middle of a billing period. There are several ways you can document this type of contract change. The following are two examples of how you can use the prorate partial period feature to document an upgrade or downgrade.

Example 1 — Prorate a partial period for an upgrade/downgrade and cancel the original contract line

In this scenario, you add a new contract line for the upgrade or downgrade item and select Prorate partial periods. Then you manually prorate the existing billing schedule for the original contract line for the partial period. Finally, cancel the original contract line as of the applicable date.

In our example, the customer has an existing contract line for the Gold service at 100.00 per month that started January 1. They want to upgrade to the Platinum service starting March 15.

1. Add a new contract line to the contract for the upgrade or downgrade with the applicable contract line start and end dates and select Prorate partial periods. See Prorate first and/or last partial periods for a new contract line.

   In our example, the customer is upgrading to the Platinum service, which has a monthly amount of 150.00, and the new contract line starts March 15. Intacct automatically calculates a prorated amount of 82.26 for the partial period and schedules it on the contract line start date.

   Follow your business process to determine the contract line start date.

2. Open the billing schedule for the original contract line and manually calculate the amount of the remaining partial period for the billing period.

   In our example, the Gold service billing is scheduled at the beginning of the month on March 1. The monthly billing amount is 100.00 We manually calculate the partial period of March 1 - 14 and get a result of 45.16.

   Follow your business process regarding partial period calculations.

3. Edit the original contract line billing schedule as follows:
   • Edit the amount in the applicable month row to set it to the partial amount. The scheduled posting date for this row must be before the cancellation date.
   • Add a new row to the schedule for the remainder of the period amount and schedule it to post the day after the cancellation date.

   In our example, we edit the March row to set the amount to 45.16. Then we add a new row scheduled for March 16 and set the amount to 54.84 (the remaining partial period for March).

4. If usage is involved in the billing, create a usage record for the applicable usage quantity and assign it a usage date prior to the cancellation date. If you want the usage date to be after the cancellation date, be sure to select the "Include unbilled usage in invoice generation" option when you cancel the contract line.
5. If the contract line is participating in an MEA, create a new MEA allocation that excludes the original contract line, includes the new contract line, and uses an MEA effective date that is equal to or before the cancellation date. See Cancel a contract line that is part of an MEA.

   In our example, we would use March 15 as the MEA effective date.

6. Cancel the original contract line using the applicable cancellation date. Follow your business process to determine the cancellation date.

   In our example, we use March 15 as the cancellation date. Intacct terminates all billing on and after March 15.

7. According to your business process, generate the invoice for the customer as of the applicable billing date. The invoice will show a line for the remaining partial period for the canceled line and any applicable partial period for the new contract line, depending on the As of date used when generating the invoice.

   In our example, we would use March 31 as the As of date.

Example 2 — Prorate a partial period for an upgrade/downgrade and use a negative contract line

In this scenario, you add a new Debook contract line that zeros out the remaining billing schedule for the original contract line and select Prorate partial periods. Then add a new contract line for the upgrade or downgrade item and select Prorate partial periods. Optionally, you then create a new MEA allocation scheme that includes the original contract line and the two new contract lines.

A Debook line is a negative contract line that has a negative quantity and positive rate. Learn more about Debook contract lines.

In our example, a customer has a contract line for the Gold service at 100.00 per month that started January 1. The customer wants to downgrade to the Silver service with a rate of 75.00 per month starting March 15.

1. Add a new Debook contract line to the contract that uses the applicable start and end dates and uses the same item and same monthly per invoice amount as the original contract line but entered as a negative amount. Select Prorate partial periods for this line.

   In our example, we add a Debook contract line and use March 15 as the start date, select Gold service as the item, enter Qty = -1 and Rate = 100 in the Calculator, and select Prorate partial periods. Intacct automatically calculates the partial month amount as -45.16 and schedules it to post on March 15.

2. Add a new contract line to the contract for the upgrade or downgrade with the applicable contract line start and end dates and select Prorate partial periods. See Prorate first and/or last partial periods for a new contract line.

   In our example, we add a line for the Silver service item with a Qty = 1 and Rate = 75.00 and we use March 15 as the contract line start date.

3. Optionally, create a new MEA allocation scheme with the applicable effective date that includes the new upgrade/downgrade contract line, the new Debook contract line, the original contract line, and any other applicable contract lines.

   In our example, we would use March 15 as the MEA effective date.

4. According to your business process, generate the invoice for the customer as of the applicable billing date.

   In our example, we would use March 31 as the As of date.

Prorate partial periods in evergreen contract lines

You can select to prorate partial periods in the first recurring billing period for an evergreen contract line. This prorates the flat/fixed amount using the calculations as outlined in the About prorate partial periods section. For example, say you add a contract line with a flat/fixed amount of 10.00 and the Billing frequency is monthly. The current recurring billing period is January 01 - 31. The contract line starts on January 17. Intacct prorates the flat/fixed amount for January to 4.84.

Subsequent recurring billing periods will use the existing flat/fixed amount. In our example, the subsequent recurring billing periods use 10.00 as the flat/fixed amount.

If you are ending or canceling an evergreen contract line, you need to manually prorate the flat/fixed amount as applicable.