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How Commitment Works

When a commitment amount is configured for a subscription:
  1. Commitment Amount: The minimum amount a customer commits to paying per billing period (e.g., $1,000/month). This guarantees minimum revenue for the business.
  2. Overage Factor: A multiplier applied to usage costs that exceed the commitment amount (e.g., 1.5x). When a customer’s usage surpasses their commitment, the excess usage is charged at this higher rate.
  3. Usage Calculation:
    • If total usage cost ≤ commitment amount: All usage is charged at standard rates
    • If total usage cost > commitment amount: The commitment amount is charged at standard rates, and the excess (overage) is charged at the overage factor rate

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Steps to Add Commitments to a Subscription

  1. Click the Add Subscription button
  2. Scroll down to the Commitment & Overage section
  3. Define the commitment amount and overage factor
Defining Commitment

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Understanding True-Up

True-up is a billing mechanism that ensures customers pay their full commitment amount even if their actual usage falls short. When enabled, if a customer’s usage doesn’t meet the minimum commitment amount, they are charged the difference as a “shortfall” or “true-up” fee.

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How True-Up Works

  1. During Billing Period: The system tracks all usage and calculates the total usage cost
  2. At Invoice Generation:
    • If usage cost < commitment amount AND true-up is enabled: A true-up line item is added to charge the remaining commitment amount
    • If usage cost ≥ commitment amount: No true-up is needed (standard commitment and overage logic applies)

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Steps to Add True-Up

You can enable true-up for a subscription during the subscription creation process:
  1. Click the Add Subscription button
  2. Scroll down to the Commitment & Overage section
  3. Define the commitment amount and overage factor
  4. Enable true-up using the toggle switch
Enabling True-Up