Proration is a billing concept that is applicable to Subscription Products. Subscription product pricing is based on a fixed time e.g., per day or per month or per year etc.

Proration is applied when a change occurs mid-period to determine the amount to charge for the partial period.

MonetizeNow supports two proration types:

Day-Based
Month-Based

Video walkthrough of the two models

Day-Based

In the Day-Based proration method, we use the number of days as the way to calculate proration. More specifically, the proration is decided based on the number of days between the end date and the start date.

Let's understand this concept by using an example.

Let's say the price of a Product is $120/year

We need to determine the price of this product for a period of 6 months, with the following dates.
Start date = Feb 15, 2023
End date = Aug 14, 2023

Here's how Day Based Proration will work in this case:

Day-based proration = Days between (Aug 14 - Feb 15) = 180
Total days in a year starting on Feb 15, 2023 = 365
Proration = 180 / 365
Price = $120 * 180 / 365 = $59.18

📘
Leap-year consideration
The denominator in the above equation will be 366 in leap years.

Day Based Proration Example

Contract Start Date = Dec 30, 2025 - Dec 29, 2025 Billing Frequency = Annual = 12 months Period1: Dec 30 - Jan 26 Billing Month = Dec 30 - Jan 29 = 31 days Active Period = Dec 30 - Jan 26 = 28 Days Proration in Month = 28 Proration in Billing Month = Active Period / Billing Month = 28 / 31 = 0.90322580645161 Proration for Billing Period = Proration in Billing Month / Billing Frequency = 0.90322580645161 / 12 = 0.0752688172043

Month-Based

Treats each month the same, no matter how many days there are in the month and all fractional calculations are applied to the final month of the calculation.

Count the number of months starting from the start date
For the last month use fractional days, if any remaining

For example:

Proration = 6
Price = $120 / 12 * 6 = $60

How Proration is Calculated in MonetizeNow

Variables

M: The final Proration Multiplier: This is the decimal value (percentage) you will eventually apply to a price.

[Sa, Ea]: The "Start" and "End" dates of the activity or assignment. This represents the specific window of time the user actually had access to the service.

p: A specific Billing Period.

m: A specific calendar month (or "bucket") falling within that billing period.

F: The Frequency or duration factor of the full billing period (e.g., for an annual subscription, F is typically 12; for a quarter, it is 3)

Concrete Example

Imagine a user buys a 3-month quarterly plan (so F=3) priced at $300.

The quarter covers April, May, and June.
The user cancels halfway through, ending their service exactly at the end of May.

April Bucket: Active 30 days out of 30.Calculation: $30/30 = 1.0
May Bucket: Active 31 days out of 31.Calculation: $31/31 = 1.0
June Bucket: Active 0 days out of 30.Calculation: $0/30 = 0.0
The Sum: $1.0 + 1.0 + 0.0 = 2.0
The Final Formula: M = 2.0/3 = 0.666 (daily proration multiplier).
The Bill: You multiply the plan price ($300) by M
1. $300 x 0.666... = $200 ARR

Summary This formula calculates a weighted average of time used, normalized against the total contract length, ensuring that ARR is calculated for each real world scenario built on a quote.