Short Answer
When a customer changes their subscription mid-cycle—upgrading, downgrading, or switching tiers—you’ll need to calculate prorated charges or credits and reflect those adjustments on the upcoming invoice. The goal is to match billing to actual service usage.
Proration Formula (for reference)
(New Plan Price × Days Remaining ÷ Total Period) – (Old Plan Price × Days Remaining ÷ Total Period)
How It Works
Mid-contract changes are common in SaaS. Customers may grow into a higher tier, scale down during a lull, or shift to a new pricing model altogether. When that happens, finance and billing teams need a clean way to reflect the change—without waiting for the next cycle. Here’s how most operators handle it:
- Calculate the delta. Start by determining the price difference between the old and new plans, prorated for the number of days left in the billing period.
- Issue a credit or incremental charge. If the customer downgraded, apply a credit memo to their account. If they upgraded, generate a one-off invoice to cover the additional charge.
- Update billing terms. Modify the subscription in your system so the new plan and pricing take effect immediately and carry forward into future billing runs.
- Communicate clearly. Send a revised invoice or billing confirmation that shows the adjustment, so there’s no confusion about what changed or why.
Real-World Example
OpenFin implemented automated mid-cycle adjustments to account for frequent upgrades across their enterprise accounts. By removing manual invoice edits, they reduced billing errors and eliminated month-end reconciliations related to plan changes.
Frequently Asked Questions
No. Most finance teams apply a credit to be used against future invoices unless your terms explicitly allow for refunds.
Yes. Advanced billing systems can detect plan changes, run proration logic, and apply adjustments automatically—without manual intervention.
Handle them separately. Metered usage should be calculated and billed independently from plan-based charges, even if the timing overlaps.
Tired of manual edits and credit memos? Automate mid-cycle billing with Ordway’s Recurring Billing Software
