Prepaid subscriptions enable you to offer usage model pricing to your customers while collecting payments in advance of that usage. Each prepaid subscription has a balance of funds against which usage is drawn down as it is reported to Chargify. They can be set up with an initial balance or can be configured with a minimum balance and amount to automatically be replenished to when the minimum balance is reached, thereby always staying active as customers use them. Prepaid subscriptions offer the benefits of usage pricing for your customers and less risk for your business since the collection of funds for services precedes service delivery.
Prepaid subscriptions are a new subscription type in Chargify that’s available to those using our Relationship Invoicing architecture. It is selected in the initial setup of the prepaid subscription when configuring a payment collection method. Payments to fund prepaid subscriptions are enabled via credit card. Therefore, each prepaid subscription must also have a valid credit card for its payment method.
They are created in an ‘active’ state when the prepayment is processed. Anytime the funding in the subscription is depleted, the subscription transitions to a ‘suspended’ status until additional funds are added to the subscription. ‘Suspended’ subscriptions can therefore be reactivated via a new prepayment or can be canceled as with other subscription types.
Unlike other subscription types in Chargify, where metered components are charged for at the end of the period, recorded usage will be debited from the subscription’s prepayment balance in real-time. At the subscription’s renewal, a summary of all the usage recorded on the subscription will be denoted on the invoice.
You can view the total usage created for this period on the subscription’s prepayment tab.
The prepayment balance consists of the total amount of prepayments made in the current billing period, with usage subtracted out. This means that if the subscription has a $100 prepayment and has recorded $50 in usage, their prepayment balance is currently at $50.
When determining whether to auto-refill the subscription’s prepayment account, we look at whether the prepayment balance has dropped below the defined threshold. As usage is drawn down against the subscription, the remaining balance is decremented and the usage this period is incremented.
If auto-replenishment is enabled on the prepaid subscription, the credit card for the subscription will be charged to bring the balance back to the refill amount. The “usage this period” section will continue to increment as usage accumulates through the subscription period.
Both the current balance and usage during the billing period will be reflected at the top of the prepayments tab, and are also available via API.
Prepaid subscriptions have two options for funding them via prepayments. Within these two options, there are four key terms to be aware of when configuring a prepaid subscription.
Each of these funding options can be updated at any time. Auto-refill can be turned on or off and the refill amount and minimum balance can be modified as well.
This is the prepayment amount that will be executed against the credit card selected for the subscription at signup. It may be $0 if you need to import a prepaid subscription; in this special case, the subscription will be created in a suspended state. When auto-replenish is enabled, the initial charge must be at least equal to the minimum balance.
Auto-refill also referred to as auto-replenish, is a functionality that will automatically collect a prepayment from the subscriber’s credit card once the prepayment account drops beneath the minimum balance. No manual intervention is required from you.
The minimum balance is the threshold at which replenishments are triggered. It cannot exceed the refill amount.
Once the prepayment balance drops below the minimum balance, we will collect as much as needed to refill the subscription to the refill amount.
Suspension and End of Life
When a prepaid subscription’s prepayment balance drops to $0 or below, the subscription will automatically move to a suspended state. This is the end-of-life state for a prepaid subscriber.
A subscription can become suspended if auto-refills are turned off and the usage recorded exceeds the prepayment balance. If auto-refills are enabled, any excessive usage amounts will be automatically collected; if the attempted auto-refill payment fails and the subscription has a zero-dollar or negative balance, the subscription will be marked as suspended.
A prepaid subscription may also be canceled at any time. The remainder of the prepayment account balance will be automatically refunded to the customer if you cancel immediately.
Prepaid subscriptions are designed to be used with metered components and events-based components as part of a usage-based subscription; in practice, this means a product that costs $0. Prepaid subscriptions cannot be subscribed to a product with a trial.
In addition, prepaid subscriptions must have net terms set to 0. This is because net terms are intended to provide the customer with additional time to pay, but prepaid subscriptions are always paid for in advance.
Renewal Dates and Invoices
Because prepaid subscriptions are always funded ahead of usage, renewal dates and invoices have different functions than other subscription types. On a prepaid subscription’s renewal date, an invoice is generated. The invoice will summarize the activity during that subscription period including the starting balance, usage, prepayments made, and the ending balance. Nothing will be due at the time of renewal or issuance of the invoice, but tax, if applicable, will be calculated here.
Prepaid Subscription Dunning
Prepaid subscriptions have their own customizable dunning process. If the credit card on file fails when auto-refilling and the subscription are not replenished, Chargify will attempt to retry the collection of the replenishment payment for the number of days set in the dunning strategy. The option of emailing the customer also exists with a pre-configured email template that can be customized per your business needs.
If payment is not able to be collected to replenish the subscription, the subscription will remain active until the balance is depleted. It will not be marked as past due, but its dunning status will be reflected under the subscription’s Dunning tab. Additionally, it will be marked with the temporary status “Prepaid Dunning”; this status is available as a filter so you may easily find all “overdue” prepaid subscriptions.
Upon depletion, the subscription moves into a ‘suspended’ status. Any prepaid subscription in suspended status can be reactivated by applying a new prepayment. Subscriptions in suspended status can also be canceled.