A customer upgrades from the $49 plan to the $99 plan on day 16 of a 30-day month. What do you charge? The honest answer depends on proration policy — and a policy you can state in one sentence is worth more than a clever one you cannot.
What proration is
Proration divides a periodic charge by the time actually used, so a customer on a plan for half a month pays roughly half the plan. It exists because plan changes do not wait for calendar boundaries, and because "we will charge you the difference next invoice" is not an answer a customer can verify.
The daily proration formula
For a monthly plan:
Prorated amount = (monthly price / days in the current month) x days on the plan
Some systems use a fixed 30-day denominator for uniformity. Either is fine — pick one, write it down, and apply it everywhere.
Worked example: an upgrade
- Current plan: $49/month, on day 16 of a 30-day month
- New plan: $99/month, effective immediately
Credit for unused time on the old plan:
- 15 days remaining x ($49 / 30) = $24.50 credit
Charge for the rest of the month on the new plan:
- 15 days x ($99 / 30) = $49.50
Net additional charge: $25.00, shown on the next invoice as one credit line and one charge line — not as a single unexplained $25.00.
Worked example: a downgrade
Same month, the customer moves from $99 down to $49 on day 16.
If you apply downgrades immediately, the same math produces a net credit of $25.00 that carries on the account. Most teams should not apply downgrades immediately — see the policy section — in which case nothing prorates and the new price simply starts at renewal.
Annual plans
For annual billing, replace the denominator with 365 (or 366) days:
- $588/year plan, upgraded to $948/year after 100 days
- Credit: 265 days x ($588 / 365) = $427.07
- Charge: 265 days x ($948 / 365) = $688.52
- Net: $261.45
Annual proration amounts are larger, which is exactly why the invoice lines must show the formula, not just the result.
The policy decisions around the math
| Decision | Options | Recommendation |
|---|---|---|
| When upgrades apply | Immediately, or at renewal | Immediately — customers upgrading want the new plan now |
| When downgrades apply | Immediately, or at renewal | At renewal — avoids refund conversations |
| How credits surface | Account credit, or invoice discount | Account credit — visible and auditable |
| Rounding | Per line, at assembly | At invoice assembly, documented |
Proration and usage meet in one place
If the plan includes usage components, the included units should follow the same proration as the price. A customer who upgrades mid-month to a plan with 50,000 included API calls should get roughly half of the difference for the remaining period — otherwise the invoice contradicts itself.
Where this lives in Floatless
Plan changes attach to the subscription record, proration shows up as explicit credit and charge lines on the draft invoice for review, and credits carry on the customer account. The recurring billing guide covers the full cycle.