Implementing Prorations and Metered Billing
Understand and apply prorations for mid-cycle changes and set up metered billing for usage-based subscription models.
Implementing Prorations and Metered Billing is a free Stripe Payments & SaaS Billing Systems lesson on CoddyKit — lesson 2 of 4. You can read the complete lesson below for free — then practise it hands-on in the browser with a built-in code editor and a 24/7 AI tutor. It is part of the Stripe Payments & SaaS Billing Systems learning path, one of 4 lessons in the course, and your progress syncs across the web and the CoddyKit app.
Flexible Billing: Intro
Welcome to advanced subscription features! Many businesses need more flexible billing than just a fixed monthly or yearly fee.
Today, we'll dive into two powerful concepts: prorations and metered billing. These allow you to handle mid-cycle changes and usage-based pricing with ease.
What are Prorations?
Imagine a customer upgrades their subscription plan halfway through their billing cycle. What happens to the money they already paid for the cheaper plan?
Proration is the process of proportionally adjusting charges when a subscription changes mid-cycle. Stripe automatically calculates this for you.
- Credit: For the unused portion of the old plan.
- Charge: For the new plan's usage up to the end of the current cycle.
Stripe's Proration Logic
When you modify a subscription in Stripe (e.g., changing the price or quantity of a subscription item), Stripe automatically calculates the proration.
It creates line items on the customer's invoice: a credit for the unused time on the old plan and a charge for the new plan from the change date to the end of the current billing period.
This ensures fairness and accuracy for both you and your customers.
Implementing Prorated Changes
When updating a subscription via the Stripe API, prorations are typically handled by default. You can also explicitly control this behavior using the proration_behavior parameter.
CREATE_PRORATIONS ensures that proration items are added to the invoice immediately or at the end of the cycle.
Try running this conceptual Java code:
import com.stripe.Stripe;
import com.stripe.param.SubscriptionUpdateParams;
public class Main {
public static void main(String[] args) {
// In a real app, you'd set Stripe.apiKey and handle exceptions.
// This snippet focuses on the update parameters.
String subscriptionItemId = "si_EXISTING_ITEM_ID";
String newPriceId = "price_NEW_PLAN_ID";
SubscriptionUpdateParams params =
SubscriptionUpdateParams.builder()
.addItem(
SubscriptionUpdateParams.Item.builder()
.setId(subscriptionItemId) // ID of the existing subscription item
.setPrice(newPriceId) // The new price for the subscription
.build()
)
.setProrationBehavior(SubscriptionUpdateParams.ProrationBehavior.CREATE_PRORATIONS)
.build();
System.out.println("Subscription update parameters created:");
System.out.println("- New Price ID: " + newPriceId);
System.out.println("- Proration Behavior: CREATE_PRORATIONS");
System.out.println("Stripe will automatically calculate and apply prorations.");
}
}What is Metered Billing?
Metered billing (or usage-based billing) charges customers based on how much of a service they actually use, rather than a fixed amount.
Think of utility bills (electricity, water) or cloud services (data storage, API calls). Customers only pay for what they consume.
- Examples: API requests, GB of storage, minutes of video streaming, number of active users.
Setting Up Metered Products
To implement metered billing, you first need to define a Product and a Price in Stripe with a usage_type set to metered.
This tells Stripe that the quantity for this price will be reported by your application, not fixed at subscription creation.
You'll also define the billing scheme (e.g., per_unit or tiered) and optional aggregation method.
Reporting Usage to Stripe
For metered billing, your application needs to track customer usage and report it to Stripe periodically, usually as it occurs or at regular intervals (e.g., daily).
This is done using the Usage Record API. You report the quantity of usage for a specific subscription_item.
Here's a conceptual Java example:
import com.stripe.Stripe;
import com.stripe.param.UsageRecordCreateParams;
public class Main {
public static void main(String[] args) {
// In a real app, you'd set Stripe.apiKey and handle exceptions.
// This snippet focuses on creating a usage record.
String subscriptionItemId = "si_METERED_ITEM_ID"; // The ID of the metered subscription item
long quantityUsed = 10L; // The amount of usage to report
UsageRecordCreateParams params =
UsageRecordCreateParams.builder()
.setQuantity(quantityUsed)
.setTimestamp(System.currentTimeMillis() / 1000L) // Current time in seconds since epoch
.setAction(UsageRecordCreateParams.Action.INCREMENT) // Add to existing usage
.build();
System.out.println("Usage record creation parameters created:");
System.out.println("- Subscription Item ID: " + subscriptionItemId);
System.out.println("- Quantity Reported: " + quantityUsed);
System.out.println("- Action: INCREMENT (adds to previous usage)");
System.out.println("This usage will be billed at the end of the current billing cycle.");
}
}How Metered Usage is Billed
Stripe aggregates all usage records reported for a specific metered subscription item within a billing period.
At the end of the billing cycle (or when an invoice is finalized), Stripe calculates the total usage and applies the corresponding price, adding it to the customer's invoice.
You can define how usage is aggregated (e.g., sum, last_ever, max) when creating the price.
Prorations vs. Metered: Recap
It's important to distinguish between prorations and metered billing:
- Prorations: Adjust charges for changes to fixed-price subscription items mid-cycle (e.g., upgrading from Basic to Pro plan).
- Metered Billing: Charges based on actual consumption of a service, with usage reported over time (e.g., paying per API call or GB of data).
Both offer powerful ways to make your billing more flexible and customer-friendly.
Quick Check: Flexible Billing
Which of the following scenarios would typically involve metered billing in Stripe?
Recap: Prorations & Metered
Great job! You've learned how to handle flexible billing scenarios with Stripe:
- Prorations: Automatically adjust charges when subscriptions change mid-cycle, ensuring fair billing.
- Metered Billing: Charge customers based on their actual consumption, requiring you to report usage via the Stripe API.
These features are crucial for building dynamic and scalable SaaS platforms. Keep exploring to master more advanced Stripe capabilities!
Frequently asked questions
Is the “Implementing Prorations and Metered Billing” lesson free?
Yes — the full text of “Implementing Prorations and Metered Billing” is free to read here on the web, and the Stripe Payments & SaaS Billing Systems course includes 4 lessons in total. To practise it interactively (a built-in code editor and a 24/7 AI tutor) and unlock the rest of the Stripe Payments & SaaS Billing Systems course, upgrade to CoddyKit PRO.
What will I learn in “Implementing Prorations and Metered Billing”?
Understand and apply prorations for mid-cycle changes and set up metered billing for usage-based subscription models. You practise Stripe Payments & SaaS Billing Systems with hands-on code you run directly in the browser, and a 24/7 AI tutor answers your questions as you work through the lesson.
Do I need any experience to start Stripe Payments & SaaS Billing Systems?
No prior experience is required. Stripe Payments & SaaS Billing Systems on CoddyKit is structured for beginners through advanced learners; this is — lesson 2 of 4, so you can start here or from the beginning and move at your own pace.
How long does the “Implementing Prorations and Metered Billing” lesson take?
Most CoddyKit lessons take about 5–10 minutes. Each one is bite-sized and interactive, so you make steady progress and pick up exactly where you left off across the web and the app.
Can I write and run code in this Stripe Payments & SaaS Billing Systems lesson?
Yes. Every Stripe Payments & SaaS Billing Systems lesson includes a built-in code editor, so you write and run real code right in your browser and get instant AI feedback — no local setup required.
All lessons in this course
- Handling Trial Periods and Plan Upgrades
- Implementing Prorations and Metered Billing
- Subscription Lifecycle Management & Events
- Coupons, Discounts, and Promotion Codes