When people want to change their plan in the middle of a billing period, what should you do? Should the change take place immediately? Should they remain on their existing plan until the end of the current billing period?
Like any question worth asking, the answer is: It depends.
At Revenue HQ, our proration logic is built around one core principle:
Cash is King
Given that “Cash is King”, there are a few rules that necessarily follow:
- If someone downgrades their plan (losing entitlements), it is preferable to keep them on their current plan until the end of the billing cycle.
- This prevents partial refunds.
- If someone upgrades their plan (adding entitlements), it is preferable to make that change effective immediately.
- We can immediately collect cash in the form of a proration charge.
- If someone is keeping all of the same entitlements, but moving to a longer-term periodicity, it is preferable to make that change effective immediately.
- Often, longer-term periodicities come with an effective discount (an annual plan has a cheaper per-month average than a monthly plan). However, the total upfront cost (today’s cash) is higher.
- We can immediately collect cash in the form of a proration charge.
- If someone is keeping all of the same entitlements, but moving to a short-term periodicity, it is preferable to make that change at the end of the current billing period.
- This prevents partial refunds.
But what do you do when there are cross-grades wherein an individual loses some previously purchased entitlements, but gains new ones?
Just remember: Cash is King.
At Revenue HQ, we solve this cross-grade question by looking at today’s potential proration charge. If the plan should would result in proration charge that is at least $10, we immediately process the plan change and capture the cash today. If the proration charge would be less than $10, we’ll let the current plan play out through the end of the billing period.
By setting a quantifiable cash threshold, we can systematize proration logic to act in your financial best interests.
Because at the end of the day, it all comes down to cash.