Billing schedule features

This article explains the features of billing schedules and billing schedule lines. It describes the different methods that are used for pricing, how to use escalations and discounts, and how to reverse a billing period. It also includes examples of proration calculations and split item groups.

Pricing methods

You can use one of the following pricing methods to calculate the unit price of an item:

• Flat
• Standard
• Tier
• Flat tier

Flat pricing

When the flat pricing method is used, the unit price for a billing schedule line item on the All billing schedules page can be edited to any value that you want. The Price unit value is always 1. Therefore, the Unit price and Net amount values for an item are the same.

Standard pricing (without a trade agreement)

When the standard pricing method is used without a trade agreement, you set up the unit price for a billing schedule line item by selecting Product information management on the Release product details page. The unit price is shown in the Base sales price section. It's calculated as Price ÷ Price quantity.

Standard pricing (with a trade agreement)

The following examples show the standard pricing calculations when a trade agreement exists. You can create trade agreements from the Release product details page.

Both examples use an item that has the following price brackets.

Qty from	Qty to	U of M	Price	Price unit
0	100	Each	1.50	1
100	200	Each	1.25	1
200	999999	Each	1.00	1

Example 1

The invoice quantity is 250, and the standard pricing method is used. Because the quantity is in the 200–999,999 price quantity range, the unit price is 1.00.

The net amount is calculated in the following way:

Net amount = (Quantity × Price) ÷ Price unit = (250 × 1.00) ÷ 1 = 250

Example 2

The invoice quantity is 100, and the standard pricing method is used. Because the invoice quantity is in the 100–200 price quantity range, the unit price is 1.25.

Note

The invoice quantity is in the 100–200 range instead of the 0–100 range because, in the standard quantity matching behavior, a quantity matches if it's more than or equal to the "from" quantity and less than the "to" quantity.

The net amount is calculated in the following way:

Net amount = (100 × 1.25) ÷ 1 = 125

Tier pricing

For the following example, an item has the following price brackets.

Qty from	Qty to	U of M	Price	Price unit
0	100	Each	1.50	10
100	200	Each	1.25	10
200	999999	Each	1.00	10

If the invoice quantity is 250, and the tier pricing method is used, the prices of the items are calculated in the following way, based on the pricing brackets:

• First 100 items: 100 × 1.50 = 150.00
• Second 100 items: 100 × 1.25 = 125.00
• Remaining items: 50 × 1.00 = 50.00

The net amount is calculated in the following way:

Net amount = (150.00 ÷ 10) + (125.00 ÷ 10) + (50.00 ÷ 10) = 15.00 + 12.50 + 5.00 = 32.50

After the net amount is calculated, the unit price is calculated by dividing the net amount by the quantity:

Unit price = 32.50 ÷ 250 = 0.13

Flat tier pricing

For the following example, an item has the following price brackets.

Qty from	Qty to	U of M	Flat tier amount	Price unit
0	50	Each	100.00	50
50	200	Each	150.00	200

The following table shows the invoices and the unit prices for the different quantities that are purchased. The net amount is calculated first, and then the unit price is calculated.

Invoice	Quantity purchased	Unit price	Net amount
1	25	2.00 ÷ 25 = 0.08	100 ÷ 50 = 2.00
2	20	2.00 ÷ 20 = 0.10	100 ÷ 50 = 2.00
3	50	2.00 ÷ 50 = 0.04	100 ÷ 50 = 2.00
4	60	0.75 ÷ 60 = 0.0125 = 0.01	150 ÷ 200 = 0.75

Escalations and discounts

An escalation is a price increase for a future billing period that the invoice hasn't yet been created for. A discount is a price reduction for a future billing period that the invoice hasn't yet been created for.

In Subscription billing, escalations and discounts can't be applied retroactively to a billing schedule. For example, you can't apply an escalation to a billing schedule three months in the past and process it. In other words, you can't apply a price increase that happened three months ago.

You can apply an escalation or discount to a billing schedule or billing schedule line in one of the following places:

• The All/Active billing schedules list page
• A specific billing schedule
• A specific billing schedule line

Apply an escalation or discount

To apply an escalation or discount to a billing schedule, follow these steps.

1. Select a billing schedule or a billing schedule line.
2. Select Escalation and discount either on the Escalation and discount tab or on the billing schedule line.
3. If a consumer price index is used to calculate the escalation or discount, select a value in the Consumer price index calculation field.
4. Select New to add an escalation or discount line.
5. For a discount, select the Discount checkbox. For an escalation, leave the Discount checkbox cleared.
6. Set the Start date and Frequency fields.
7. For deferral items that use the unbilled revenue feature, set the End date field.
8. Set the Percentage, Amount, or Consumer price index schedule field.
9. Set the End date field.
10. Select OK.
11. Repeat steps 4 through 10 for each additional escalation or discount line that you require.

Fields on the Billing schedule lines page

The Billing schedule lines page contains the following fields.

Field	Description
Item number	The item number for the billing schedule line. This field is available only when the page is opened from a billing schedule line item.
Consumer price index calculation	Select the method that is used to calculate the consumer price index escalation: Prior consumer price index – Use the previous consumer price index value for the escalation calculation. Base consumer price index – Use the base consumer price index value for the escalation calculation.
Line grid
Discount	Set the checkbox to specify whether the change in the amount is an escalation or discount: Selected – The change applies a discount to the billing schedule or billing schedule line. Cleared – The change applies an escalation to a billing schedule or a schedule line. The setting of this checkbox can't be changed for items that use the unbilled revenue feature. Additionally, discounts can't be applied to items that use revenue splitting.
Start date	Select the start date of the escalation or discount.
Frequency	Select the frequency of the escalation or discount: None, Monthly, Quarterly, Semiannually, or Annually.
Percentage	Specify the percentage of the escalation or discount.
Amount	Specify the amount of the escalation or discount.
Consumer price index schedule	Select the consumer price index schedule that is used for the calculations.
End date	Select the end date of the escalation or discount. Note: This field is required for items that use the unbilled revenue feature.
Deferral schedule number	The deferral schedule number. This field is available only when the page is opened from a billing schedule line.
Journal batch number	The journal batch number. This field is available only when the page is opened from a billing schedule line.
Total discount amount	The sum of discount amounts for all the lines in the grid. This field is available only when the page is opened from a billing schedule line.
Current short-term unbilled revenue amount	The current short-term unbilled revenue amount. This amount appears when a short-term deferral method is selected on the Recurring contract billing parameters page, and the accounts for the line item are set up on the Unbilled revenue setup page.
Current long-term unbilled revenue amount	The current long-term unbilled revenue amount. This amount appears when a short-term deferral method is selected on the Recurring contract billing parameters page, and the accounts for the line item are set up on the Unbilled revenue setup page.

Proration examples

Calculations for proration can be based on the number of days or the number of months. The method that is used for the proration calculation is set on the Recurring contract billing parameters page. The proration method affects how the amounts are calculated for a billing schedule in the following situations:

• Initial creation
• Application of an escalation or discount
• Termination
• Placement or removal a hold
• Addition of support or renewal

The proration method also affects the calculations on the monthly recurring revenue (MRR) report.

Example 1

The annual amount of a billing schedule is $5,000. The start date is August 12, 2019, and the end date is December 22, 2019. The billing frequency is annual. The prorated amount is calculated in the following ways, depending on whether the daily or monthly calculation method is used:

• Daily

  • Number of days = End date – Start date + 1 = 133 days
  • Number of days in the year = August 11, 2020 – August 12, 2019 + 1 = 366 days
  • Prorated amount = 5,000 × (133 ÷ 366) = 1816.94

• Monthly

  • Start month portion = (31 – 12 + 1) ÷ 31 = 20 ÷ 31
  • Middle months = 3
  • End month portion = 22 ÷ 31
  • Prorated amount = 5,000 ÷ 12 × [(20 ÷ 31) + 3 + (22 ÷ 31)] = 1814.52

Example 2

The annual amount of a billing schedule is $12,000. The start date is August 1, 2019, and the end date is December 31, 2019. The billing frequency is annual. The prorated amount is calculated in the following ways, depending on the calculation method:

• Daily

  • Number of days = End date – Start date + 1 = 153 days
  • Number of days in the year = July 31, 2020 – August 1, 2019 + 1 = 366 days
  • Prorated amount = 12,000 × (153 ÷ 366) = 5016.39

• Monthly (Full month)

  • Number of months = 5
  • Total months = 12
  • Prorated amount = (12,000 × 5) ÷ 12 = 5,000

Reversing a period billing

For this example, a billing schedule has only one line:

• Billing is done monthly for 12 months from January through December.
• Invoices have been created for all periods up through April.

You want to reverse the invoice for the April billing period.

If a sales invoice had not yet been created for the April billing period, you could delete the sales order. In this case, the Billed status for the detail would be removed. However, because an invoice has been created for the billing period, the Billed status for the detail can't be cleared. Therefore, to reverse the April billing, you must create an offsetting credit note for the line.

1. On the All billing schedules page, create a schedule line for the same item.
2. Change the Quantity value for the item to the negative of the original quantity.
3. Set the Billing frequency field to One-time.
4. Update the start and end dates so that they match the dates of billing detail line that you want to create a credit note for. For this example, set the start date to April 1, 2019, and the end date to April 30, 2019.
5. Save your changes.
6. Open the Generate invoice page, and create the sales order that has the credit note for the specified period.
7. Optional: Post the invoice.

When you review the lines for the billing schedule, you will notice that the new line has a link to the credit note. The original line will still have a link to the original April invoice.

Split item group examples

For this example, the following setup is in place:

• On the Recurring contract billing parameters page, Split by item group is selected, and the Unique schedule type field is set to Customer.
• Three item groups have been created: PREFIX, DATAHUB, and SPP.
• Customer US-001 has multiple billing schedules where the item group is PREFIX or DATAHUB.
• Customer US-002 has multiple billing schedules where the item group is PREFIX or SPP.

Billing schedule number	Customer	Item group
SCH001	US-001	PREFIX
SCH002	US-001	DATAHUB
SCH003	US-002	PREFIX
SCH004	US-002	SPP

Customer US-001 purchases a renewal item that belongs to the PREFIX item group. This transaction is a new sales order.

Sales order #	Customer	Main item	Renewal item	Renewal item group	Billing schedule number
SO0001	US-001	D0001	D0002	PREFIX	SCH001

When the invoice for the sales order is posted, the renewal item is added to the existing billing schedule (SCH001) for the customer. This billing schedule uses the PREFIX item group. All renewal items that belong to the same item group are put into the same billing schedule.

Header

Billing schedule number	Customer	Item group
SCH001	US-001	PREFIX

Line

Billing schedule number	Customer	Item group
SCH001	US-001	D0002

Customer US-001 now purchases a renewal item that belongs to the SPP item group. This transaction is a new sales order.

Sales order #	Customer	Main item	Renewal item	Renewal item group	Billing schedule number
SO0002	US-001	D0003	D0004	SPP

Currently, customer US-001 doesn't have a billing schedule that uses the SPP item group. Therefore, a new billing schedule is created.

Header

Billing schedule number	Customer	Item group
SCH005	US-001	SPP

Line

Billing schedule number	Customer	Item group
SCH005	US-001	D0004

Multiple billing schedules for the same end user and customer

For this example, the following setup is in place:

• On the Recurring contract billing parameters page, Split by item group is selected, and the Unique schedule type field is set to End user.

• On the End users page, the following customer and end user relationship is set up.

  Customer account	End user account
  US-001	US-221

Multiple billing schedules are created for the customer and end user combination. Because Split by item group is selected on the Recurring contract billing parameters page, multiple billing schedules can be created for the same customer and end user relationship.

Billing schedule number	Customer	End user account	Header item group
SCH005	US-001	US-221	IG1
SCH006	US-001	US-221	IG2
SCH007	US-001	US-221	IG3

On the Item setup page, you create support and renewal item relationships.

Item code	Item relation	Support item	Renewal item	Renewal item group
Table	D001	ITEM27	D007	IG1
Table	D002	ITEM28	D005	IG2
Table	D003	ITEM29	D006	IG3

You now create a sales order for customer US-001. This sales order has items from the Item setup page. When you create the sales order, open the Support and renewal process page, and set the End user account field and any other required information for the renewal item.

When the invoice for the transaction is created and posted, different billing schedules are created for the customer/end user and item group combination. More than one line on the same sales order can be assigned to the same billing schedule.

Sales order #	Customer	End user account	Main item	Support item	Renewal item	Billing schedule number
SO0001	US-001	US-221	D001	ITEM27	D007	SCH005
SO0001	US-001	US-221	D002	ITEM28	D005	SCH006
SO0001	US-001	US-221	D003	ITEM29	D006	SCH005