Proration

Proration is a billing adjustment that occurs when a subscription change happens partway through a billing period. If a customer upgrades from a $50/month plan to a $100/month plan on the 15th of a 30-day month, proration calculates the credit for the unused portion of the old plan and the charge for the remaining portion of the new plan.

In the example above, the customer would receive a $25 credit for the unused half of the $50 plan and be charged $50 for the remaining half of the $100 plan, resulting in a net charge of $25 for that billing period. The next full billing cycle would charge the full $100.

Proration comes in several forms. Immediate proration charges or credits the difference right away, which is the most common approach. Deferred proration waits until the next billing cycle to apply changes — simpler to implement but less fair to the customer. Some businesses avoid proration entirely by only allowing plan changes at the start of the next billing cycle.

Getting proration right is important for customer trust and revenue accuracy. Overcharging customers during upgrades creates support tickets and disputes. Undercharging during downgrades leaks revenue. Most payment providers like Stripe and Braintree handle proration calculations automatically, but the business still needs to decide which proration strategy to use.

Proration also interacts with payment recovery. If a prorated charge fails, the recovery system needs to handle the partial amount correctly. LostChurn tracks the full context of each charge — including prorations — so that retry attempts and dunning messages accurately reflect what the customer owes.