In your plan configuration, Lago provides the flexibility to define specific spending commitments tailored to your business needs. These commitments serve as a financial baseline for the services you offer. However, understanding the unique requirements of each customer, Lago offers the capability to customize these commitments on a per-customer basis at the time of creating a subscription.

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Minimum commitment

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Guidelines

Besides setting spending minimums per charge, Lago also allows you to define minimum invoice totals. This ensures customers meet a minimum spend per billing period, securing a steady revenue flow and aiding in accurate financial forecasting. The minimum commitment per invoice set in Lago applies to the total spending in the billing period including -if applicable- the subscription fee and all usage-based fees.

• Commitment interval: The minimum commitment is aligned with the billing interval of the plan. For instance, if the plan is billed monthly, the minimum commitment is also established on a monthly basis;
• Customizable commitments: When assigning a plan to a customer, you have the option to override the default commitment. This allows for customized minimum commitments per customer, accommodating negotiated contract terms; and
• Arrears calculation: The commitment is calculated in arrears, meaning Lago waits until the end of the billing period to assess whether users have met their minimum spending commitment. This approach ensures accurate billing based on actual usage.

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True-up fee

If the total spending falls below the minimum commitment at the end of the billing period, Lago will apply a true-up fee to adjust the invoice and meet the minimum spending requirement. Conversely, if spending exceeds the minimum commitment, Lago will generate an invoice for the actual consumption, without issuing a true-up fee.

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Defining a minimum commitment

{
    "plan": {
      "name": "Basic",
      "invoice_display_name": null,
      "created_at": "2024-02-23T16:01:04Z",
      "code": "basic",
      "interval": "monthly",
      "description": "",           
      "amount_cents": 10000,
      "pay_in_advance": true,
      "bill_charges_monthly": null,
      "customers_count": 2,
      "active_subscriptions_count": 2,
      "draft_invoices_count": 0,
      "parent_id": null,
      "minimum_commitment": {
        "plan_code": "basic",
        "invoice_display_name": "Minimum Contract Commitment",
        "amount_cents": 50000,
        "interval": "monthly",
        "taxes": []
        },
      "charges": [
          {
            "id": "ca205886-cf09-4e42-aed6-34cb2afd0c29",
            "billable_metric_id": "5b320600-715b-4ef5-88c1-4f88c0ec5c50",
            "invoice_display_name": "",
            "billable_metric_code": "storage",
            "created_at": "2024-02-23T16:01:04Z",
            "charge_model": "standard",
            "invoiceable": true,
            "pay_in_advance": false,
            "prorated": false,
            "properties": {
                "amount": "1"
            },
            "group_properties": [],
            "taxes": []
          },
          {
            "id": "1d5c78c6-0e22-424f-af8d-6784f6ff44ec",
            "billable_metric_id": "4cbc5940-32fb-48a8-aa39-ad664b34a062",
            "invoice_display_name": null,
            "billable_metric_code": "seats",
            "created_at": "2024-02-23T16:04:09Z",
            "charge_model": "standard",
            "invoiceable": true,
            "pay_in_advance": true,
            "prorated": false,
            "min_amount_cents": 0,
            "properties": {
                "amount": "7"
            },
            "group_properties": [],
            "taxes": []
          }
        ],
      "taxes": []
    }
}

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Overwriting a minimum commitment

    {
    "subscription": {
      "external_customer_id": "5eb02857-a71e-4ea2-bcf9-57d3a41bc6ba",
      "plan_code": "premium",
      "name": "Repository A",
      "external_id": "my_sub_1234567890",
      "billing_time": "anniversary",
      "subscription_at": "2022-08-08T00:00:00Z",
      "plan_overrides": {
        "amount_cents": 10000,
        "amount_currency": "USD",
        "description": "Plan for early stage startups.",
        "invoice_display_name": "Startup plan",
        "name": "Startup",
        "tax_codes": [],
        "minimum_commitment": {
          "plan_code": "basic",
          "invoice_display_name": "Minimum Contract Commitment",
          "amount_cents": 50000,
          "interval": "monthly",
          "taxes": []
        }
        "charges": []
      }
    }
}