Like anniversary mode, monthly billing mode will invoice your customers on a regular billing cycle, usually once a month. Unlike anniversary billing, customer subscriptions will all renew on the first day of the month. Billing your customers once a month has a couple of main features:
Monthly billing often involves proration. If a customer would like to buy a subscription on the 15th, you can either choose to have that subscription start on the first of the next month, or to prorate that first month. Proration adds another level of complexity to your billing, which can sometimes cause confusion for your potential customers. Because of this, and the scalability issues mentioned above, we recommend that companies do not use monthly billing unless they intend to have a small number of customers.
However, it is possible to use monthly billing mode and set your plans to not prorate. This causes these plans to behave as if you were in anniversary mode. This is especially useful for selling items such as SSL certificates and domains. These items have fixed start and renewal dates determined by outside sources. Proration would result in subscription renewal dates that did not match the actual item's renewal date, and could cause problems.
We have already seen what the typical customer's invoicing will look like in anniversary mode. Now let's see what this system will look like in monthly mode.
Meet Alice's friend Bob. On June 15th, 2008, Bob decides he wants to buy several subscriptions from you. He buys the Personal hosting plan on a monthly cycle and a domain on a yearly cycle. Your Personal hosting plan is set to prorate; your domain plan is not. Let's assume that you have your proration threshold set to the 15th. This means anyone who signs up on the 15th or later will pay for the rest of the month they are in, plus the next month.
As part of the order process, Bob paid the first invoices for these subscriptions. Like anniversary billing, no matter how Bob pays, his subscriptions will automatically be updated with their next renewal date. Because Bob's Personal Hosting subscription was set to prorate, his first invoice charged him for the rest of June and the whole month of July. The domain subscription was not set to prorate, so he was charged for a full year.
At the end of July, Bob will get another invoice for his Personal Hosting subscription, due August 1st. This will cover the whole month of August. Say that Bob decides, after paying this bill, that he would like to buy a Business Hosting subscription for his new small business. On August 5th, Bob goes through your order process again, this time to purchase Business Hosting. Because the 5th is before your proration threshold of the 15th, Bob will simply pay for the rest of August in this first invoice. At the end of August, Bob will receive a single invoice. This invoice will carry charges for both the Personal Hosting and Business Hosting account.
Fast-forward to May of 2009. Bob will again receive an invoice in late April for both the Personal Hosting and Business Hosting subscriptions. May 15th, Bob will receive a second invoice, this time for his domain which is set to renew June 15th. Remember, this subscription was set not to prorate, so it follows the anniversary billing behavior for subscription renewal dates. At the end of May, Bob will again be billed for his two hosting subscriptions on a single invoice.
Just like in anniversary mode, Bob's invoices can be set to be paid automatically, with a credit card kept on file or via third party subscription accounts.