When generating a contract with a monthly recurring billing plan, a custom billing date may be set that happens to be after the start date. To maintain correct invoicing, the payment schedule starts a month before. Consequently, a mismatch occurs between the payment schedule and the contract period.
In this example, the customer is set to start from January 9, 2023. However, the payment schedule begins with a fee from December 2022.
Understandably, customers are confounded. They may hesitate to sign the contract and ask for an explanation.
The Monthly Billing Cycle
Our example contract starts on Jan 9, 2023 and end on June 30, 2023. The custom billing date is set to the 25th each month.
Hence, the first billing date will be Jan 25, 2023. But the payment schedule has an amount due from December 2022. Why so? It's simply a case of accommodating the monthly billing cycle:
- The membership starts on 09.01.2023 and the first billing date is 25.01.2023.
- Come 25.01.2023, bills are due for the period between 09.01.2023 and 24.01.2023.
- To accommodate this period into the monthly billing cycle, the payment schedule covers a one-month period between 25.12.2022 and 24.01.2023.
Are You Really Being Charged?
Despite what the contract says, you are only being charged for the period between the start date (09.01.2023) and the end date (24.01.2023). Again, it's simply a matter of conforming to the monthly billing system.
There are two ways to prevent such occasions:
- Set a custom billing date that's before the contract start date.
- Set a custom billing date that matches the contract start date.
In both cases, the contract will be generated with the payment schedule starting from the first month.