Proration in Work 365

Modified on Thu, Oct 9 at 11:12 AM

Audience: Administrators, Billing Teams

Overview

Proration in Work 365 ensures customers are billed only for the portion of a billing period actually used. When a Billing Contract’s Start/End Dates don’t align with its Billing Frequency (e.g., a 6-month span within an annual cycle), Work 365 automatically calculates prorated amounts on the relevant invoices for recurring subscriptions under that contract.

How Work 365 Determines Proration (At a Glance)

Scope: Applies to recurring subscription charges on a Billing Contract.
Trigger: A misalignment between the contract’s Start/End Dates and Billing Frequency (Monthly, Quarterly, Annual, etc.).
Calculation: A proportional charge based on the fraction of the term covered by the invoice’s start/end dates (i.e., partial period vs. full period).
What’s Not Prorated:
- NRIs (Non-Recurring Items) — posted exactly as entered.
- Usage-based charges — billed from imported consumption for the period (not by contract date proration).

? Taxes & percentage discounts apply proportionally to the prorated lines just like a full-term invoice.

Supported Proration Scenarios

Scenario 1 — Prorated Final Term

When: The Billing Contract continues beyond a whole number of periods, so the final invoice must cover a partial duration.

Example

Detail	Example Value
Contract Duration	Jan 1, 2020 → Jun 30, 2021
Billing Frequency	Annual
Invoice 1	Jan 1 → Dec 31, 2020 (Full year)
Invoice 2	Jan 1 → Jun 30, 2021 (Prorated – 6 months)

✅ Customer pays only for the additional half-year.

Scenario 2 — Proration Up Front

When: The Billing Contract starts mid-cycle (e.g., July 15). Work 365 prorates the first invoice, then transitions to the regular cadence.

Requirements

End Date is defined on the Billing Contract.
Auto-Renew = No so the first, partial term is treated as a single prorated period.

Result: The first invoice reflects the partial period; subsequent invoices follow the standard full term.

Scenario 3 — Half-Year + Full Term (Split Contracts)

Use two Billing Contracts when you want a temporary prorated period followed by regular annual billing.

Contract Type	Period	Provider	Invoice Type
Prorated Contract	Jul 1 → Dec 31	Do Nothing Provider	Prorated half-year invoice
Regular Contract	Jan 1 → Dec 31	Standard Provider	Full-term annual invoice

? The Do Nothing Provider ensures the temporary/prorated contract does not trigger provisioning changes during the transition. The second contract handles normal provisioning and annual invoicing.

Usage Notes & Considerations

Eligibility: Proration applies when Start/End Dates and Billing Frequency do not align to whole periods.
Data Accuracy: Confirm Start Date, End Date, Billing Frequency, Payment Term, and Auto-Renew on each Billing Contract.
Initial Partial Terms: Set Auto-Renew = No for initial partial-period contracts to trigger proration for that term.
Separate Cycles: Use separate contracts for the new regular term after a transition period to avoid unintended proration.
Post-Run Review: After generating invoices, verify date ranges, quantities, discounts, and taxes on prorated lines.
Renewals: Proration is not applied on renewal unless dates are again misaligned.
Discounts & Taxes: Percentage discounts and tax calculations apply proportionally to the prorated charge.
NRIs & Usage:
- NRIs are not prorated; they post as entered.
- Usage-based charges reflect actual consumption intervals, not contract-date proration.

Example Summary

Scenario	Billing Contract Example	Result
Prorated Final Term	Jan 2020 – Jun 2021	Final invoice prorated for 6 months
Proration Up Front	Jul 15 – Dec 31, 2021	First invoice prorated; then standard cadence
Split Contracts	Contract 1 (Half-Year), Contract 2 (Annual)	Separate prorated and standard cycles

Quick Setup Checklist

✅ Set Start Date and End Date to reflect the intended partial period.
✅ Set Billing Frequency (Monthly/Quarterly/Annual, etc.).
✅ For initial partial periods, set Auto-Renew = No.
✅ For post-transition terms, create a new Billing Contract with standard dates/cadence.
✅ Validate Tax settings, Discounts, and Price List on the contract.
✅ Generate a test invoice to confirm prorated dates and amounts.

FAQs

Q: Does proration work for mid-term quantity changes (license adds/removes)?
A: Quantity changes are captured via License Change Logs (LCLs) and billed using their effective dates. This isn’t “contract proration,” but the invoice will reflect partial charges based on LCL timing.

Q: Can I prorate flat discounts?
A: Percentage discounts apply proportionally to prorated charges. Flat credits should be applied via NRIs (negative amounts) or negative sales order lines and are not prorated automatically.

Q: What if my provider (e.g., Microsoft) usage data arrives late?
A: Usage invoices reflect actual consumption. If usage sync is delayed, you may need to regenerate invoices once data becomes available.

Troubleshooting

Issue: No proration occurred on the invoice
Check:

Is End Date set on the Billing Contract (for upfront proration)?
Is Auto-Renew = No for the initial partial period?
Do Start/End Dates actually create a partial period relative to the Billing Frequency?
Are you invoicing the correct contract (and not a different full-term contract)?

Issue: Proration appears larger/smaller than expected
Check:

Confirm the invoice period dates and billing schedule.
Verify subscription quantities and effective dates (including any LCLs).
Review discount and tax settings applied to the Billing Contract.