Proration

Proration is the adjustment of a subscription charge to cover only the portion of a billing period a customer actually used a plan. When someone upgrades from a $10 to a $30 plan halfway through a monthly cycle, proration charges roughly the $20 difference for the remaining days rather than a full $30, and the next invoice returns to normal. It also works in reverse: downgrades and cancellations generate prorated credits. Why it matters: mid-cycle plan changes are constant in SaaS, and getting proration wrong is a common source of billing disputes, support tickets, and revenue leakage. Customers notice when they're overcharged; you lose money when upgrades aren't captured. Practical note: billing platforms like Stripe and Paddle handle proration automatically, but you should decide your policy deliberately — whether to prorate upgrades immediately or at next renewal, and whether downgrades credit cash or account balance. Test the edge cases (same-day multiple changes, annual-to-monthly switches) before launch, because they're where the math breaks.