

Ask HN: What's the best way to break up charges for recurring billing? - bcx

I recently had a conversation about the best way to do recurring billing.  We identified a few pros and cons for a variety of approaches.   I am interested on the HN take. (NOTE: This is technology agnostic, and more of a conceptual discussion)<p>1) Prorated First Month, all recurring clients are billed on the first.
+ Cash flow at the beginning of the month
+ Cash flow lines up with bills.
+ Easy to do maintenance on recurring billing system (only runs once a month)
+ Reasonably easy for users to understand
- small partial month transactions for people who order late in the month.<p>2) Prorated 1st month with 2nd month prepay
+ (all of the above)
+ Even more cash flow early on, as every client is always one month ahead on payments
- some clients might not want to prepay for 2 months at once
- bill might be different then what the expect to pay, i.e. signup now for $15 costs them $29 (if they order on the 2nd of the month)<p>3) Everyone is on a 31 day cycle
+ everyone charged a flat $15 for every charge.
- Billing period slowly shifts around, not the same day every month
- cash flow spread out throughout the month
- harder to do maintenance, as billing must run every day<p>Other ideas:
4) Only Annual
+ large amount of cash on hand
- might scare away new users<p>5) Instead of prorating first month, call it a trial period, that starts 'now' and ends whenever your billing cycle begins.
- confusing to end users
- lost revenue due to trial<p>What is 'your' take? (your.. the collective HN)
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smidwap
1) Standard practice. Good for accounting purposes.

2) Unnecessarily complicated for end-user. Also messes with accounting because
you don't want to record revenue earned for the second month in the first
month.

3) Accounting nightmare! But nonetheless, common practice throughout the web
industry.

4) Should be an option for end-users. Common practice, but again ensure you're
deferring unearned revenue.

5) Eh, just sounds kind of cheesey. Why should a user who finds your site one
day before the first of the month only be treated to a 1 day trial? Trials are
good for the end-user, but use it in conjunction with #1.

These options should not be used exclusively, i.e. I would favor using 1 and
4.

Sorry for the accounting comments. I'm taking an accounting course right now
and couldn't help but throw my comments in there. It's still important though.

~~~
bcx
For #1 how would you handle situations where someone signs up up on the 20th
of the month. Would you charge them for 10 days, or for ~40?

What about if instead they signup on the 28th of the month? 3 days or ~33?

