With usage-based, or metered billing, customers pay at the end of the service period (i.e., in arrears) for the product/service they already used.
This differs from the fixed-price billing typical for most SaaS businesses where customers pay in advance at the start of the service period for the product/service they’re about to use.
ChartMogul was built with fixed-priced advance billing in mind. However, businesses with usage-based billing can still benefit from ChartMogul's powerful subscription metrics and analytics by keeping a few considerations in mind. Here, we outline what those are.
Here’s what we cover in this article:
Resources and further reading:
- From Chargebee: What is Usage-based Billing?
- Customer & Subscription Statuses
- Lifecycle of subscription
ChartMogul uses billing data (invoices) to generate subscription metrics and analytics. When you invoice in advance (i.e., at the beginning of the month), metrics in ChartMogul reflect the current service period. When you invoice in arrears (as is often the case with usage-based billing), metrics reflect the previous service periods you’ve billed. There are a few other considerations to keep in mind, including how ChartMogul reports subscribers, subscriptions, and MRR.
How ChartMogul generates metrics from billing data
ChartMogul normalizes data from invoice line items into subscriptions to generate key metrics.
When invoices are issued for products/services at the start of a service period (e.g., at the beginning of the month), ChartMogul generates metrics for the current service period, which you can view and work with immediately.
With usage-based billing, however, invoices are issued at the end of the service period, which means metrics in ChartMogul are accurate and up-to-date only after you’ve completed invoicing for the current (or most recent) service period.
Read more about how ChartMogul works.
Using ChartMogul with usage-based billing
There are also several additional details you should understand and consider when using usage-based billing with ChartMogul.
Customers will continue to be classified as leads until their first invoice is generated (or paid) at (or after) the end of their first service period.
Metrics and analytics change retroactively when invoices are received at (or after) the end of the current (or more recent) service period.
As a result, we recommend waiting until after billing is complete for the current (or most recent) service period before working with metrics and analytics in ChartMogul.
Subscriptions billed in arrears are perpetually classified as past due since payment is received at the end of the service period and not the beginning when ChartMogul expects.
To ensure accurate metrics, we recommend reviewing past-due subscriptions frequently in ChartMogul and canceling those that have churned.
ChartMogul’s pricing is based on your total monthly recurring revenue (MRR).
MRR may be inflated due to past-due subscriptions that should have been cancelled.
To ensure accurate ChartMogul renewal pricing, we recommend reviewing past-due subscriptions frequently in ChartMogul and canceling those that have churned.
We additionally advise caution when using the Handling Past-due Subscriptions setting in connection with usage-based billing as it can lead to unintended churn.
If you decide to enable this setting, we recommend setting Automatically churn subscriptions which are [X] days past due to at least 15 days longer than normal your billing frequency — for example, automatically churning subscriptions when the invoice is 45 days past due when you generate usage-based invoices every 30 days (i.e., monthly).
A usage-based billing example
Sally, a new customer, signs up and starts a new subscription on July 1. ChartMogul classifies her as a Lead during the first month she uses the service because she’s not yet received and paid her first invoice.
On August 1, Sally gets her first invoice, billing her for July’s subscription usage. When the invoice is issued, ChartMogul generates a New Business MRR movement dated July 1, retroactively updating metrics and analytics for July.
Sally’s next service period begins on August 1. As she won’t pay her next invoice until the beginning of September, ChartMogul classifies her as a Past-due Subscriber. This process happens every month until Sally cancels her subscription or is classified as churned based on the Handling Past-due Subscriptions setting.