Proration in Work 365

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: Contract Duration Example Value: Jan 1, 2020 → Jun 30, 2021
• Detail: Billing Frequency Example Value: Annual
• Detail: Invoice 1 Example Value: Jan 1 → Dec 31, 2020 (Full year)
• Detail: Invoice 2 Example Value: 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: Prorated Contract Period: Jul 1 → Dec 31 Provider: Do Nothing Provider Invoice Type: Prorated half-year invoice
• Contract Type: Regular Contract Period: Jan 1 → Dec 31 Provider: Standard Provider Invoice Type: 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: Prorated Final Term Billing Contract Example: Jan 2020 – Jun 2021 Result: Final invoice prorated for 6 months
• Scenario: Proration Up Front Billing Contract Example: Jul 15 – Dec 31, 2021 Result: First invoice prorated; then standard cadence
• Scenario: Split Contracts Billing Contract Example: Contract 1 (Half-Year), Contract 2 (Annual) Result: 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.