FAQs: Configuration, Rating and Billing

Question: What are Commitments/Prepayments?

A commitment is when an end customer agrees to pay you a fixed amount over the duration of their contract with you. This can be done in advance, where it is known as a prepayment, or in arrears. The agreed commitment/prepayment amount is used to consume one or more of your products or services.

The commitment/prepayment amount is payable regardless of the actual usage by the end customer of your service or product. You can define overage rates should the original agreed prepayment amount be exhausted before the customer's contract ends. For an example, see m3ter prepayment example.

Question: How does a Prepayment/Commitment differ from a minimum spend?

A minimum spend ensures that you receive revenue from your customers in each billing period of at least the minimum spend amount. It is assessed on a bill-by-bill basis.

The customer consumption of your product or service is based on usage at an agreed pricing. Should the customer consumption amount be less than the minimum spend, they will be billed at the minimum amount. If the total value of the usage consumed exceeds the minimum spend amount, then the customer is charged for the usage amount. That is, they are charged the minimum spend plus the usage excess over the minimum.

A commitment or prepayment is assessed across multiple bills for the entire contract period. It represents your customer's prepayment for services or contractual spend agreements.

It is typically a contractual purchase clause requiring your customer to purchase a minimum quantity of your service at an aggregate agreed price over the contract term.

Question: Does m3ter support both in advance and in arrears billing?

Yes, m3ter supports both billing in advance and in arrears with the following conditions:

For usage charges, only billing in arrears is supported. Billed in arrears is also known as "invoice in arrears", "paid in arrears", or "arrears billing". This is when the billing and payment occur after a service is completed, rather than in advance.
Other charges such as standing charges, prepayments/commitments, and minimum spend can be billed in advance or in arrears. Billing in advance means sending bills to customers before the service is completed.

Example of billing in advance

Standing charges, minimum spends, and prepayments/commitments can all be set to bill in advance. Suppose

The quarterly prepayment amount is $10,000.
The prepayment runs from 01-Jul-2022 through 30-Sep-2022.
Billing frequency is monthly.

If the prepayment first bill date is 01-Jul-2022 and prepayment is set to "bill in advance", the upfront fee will appear on the June invoice, which is typically run in the first week of July.

Question: Can I migrate to m3ter with customers already within a prepayment period?

Yes, m3ter supports migration even with end customers in mid-flight, when they have usage already logged against their prepayment. This means the end customers have remaining balances that m3ter does not know anything about.

Currently, m3ter supports two approaches to this use case, depending upon the exact setup of the prepayment schemes and other circumstances.

Insert usage into m3ter reflecting the usage that has already occurred prior to migration over to m3ter.
Tweak the prepayment amounts in m3ter, ignoring the usage so that the remaining balance is represented as expected.

Additionally, we are introducing ledger functionality soon that will mean we can manually adjust the ledger to bring the commitment/prepayment balance precisely in line with its current state at the time of migration cut-over.

Question: What are Balances and how can they be used?

Balances, also known as Top-Ups or Prepaid draw-down, can be used for cases where a customer prepays an amount for use against a service. Any service consumption draws-down against the prepayment Balance for charging and billing purposes.

The prepayment occurs outside of m3ter.

Balances can also be used as a "Free Credit" scheme. This encourages sales because customers can use the free credits for consumption against your product or service for a trial period. The free credits can be added on customer signup, or at other stages during the active customer service period.

Balances can also enhance customer satisfaction. Credit can be added to a balance when there have been issues delivering your service, or some other form of customer dissatisfaction has occurred. The customer satisfaction balance is used for future service consumption, instead of you having to take the trouble to credit and adjust an invoice that covered the period during which the agreed issue occurred.

Question: Can I use Prepayments/Commitments and Balances together?

Yes. You can use Prepayments and Balances together, with the option to draw-down against the Balance credit amount before or after any Prepayment amounts on an Account.

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