Prorated vs Full
Usage-based charges can be either bill fully or prorated based on the number of days used.
You can determine whether a charge is prorated or fully-billed. Understanding the distinction between these two types of charges is crucial for effectively managing your billing processes. In this documentation, we will delve into the differences between prorated and fully-billed charges and their implications within the Lago system.
Prorated charges
Only charges that are recurring (billable metric with recurring argument sets to true) with a charge_model defined to standard, graduated or volume can be prorated.
When creating a prorated charge in Lago with the prorated parameter set to true, an important behavior is triggered.
Adding a new unit during the billing period results in the amount due for that unit being prorated based on the number of
days it was used.
This means that your customers will only be charged for the actual number of days they utilized a billing unit. Let’s consider
the example of prorated Seats, where each seat costs $10. If a new seat is added on June 10th, the unit will be prorated for 22 days, resulting in a corresponding prorated charge for that duration. This ensures fair and accurate billing based on the
usage period.
Example: (1 Seat x $10), used for 22 days = $7.33
By leveraging prorated charges in Lago, you can provide transparent and cost-effective billing for services that are added or removed mid-billing cycle, adjusting the charges according to the actual duration of usage.
Fully-billed charges
Note that metered charges (billable metrics with recurring sets to false) are automatically fully-billed.
When creating a fully-billed charge in Lago with the prorated parameter set to false, an important behavior occurs.
If a new unit is added during the billing period, the amount due for that unit is billed in full, regardless of the number of
days it was used.
This means that your customers will be charged for the entire billing period, even if they only utilized the billing unit for a few days. Let’s consider the example of fully-billed Seats, where each seat costs $10. If a new seat is added on June 10th, it will be billed for the full billing period. For instance, if there is one seat that was used for 22 days in the billing period, the charge would be calculated as follows:
(1 Seat x $10), used for 22 days = $10.
By utilizing fully-billed charges in Lago, you ensure that you do not lose revenue by billing customers for the entire billing period, regardless of the actual duration of usage.
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