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Billing cycle anchors provide precise control over when recurring charges are billed, enabling businesses to align billing with customer preferences, business processes, or contractual requirements.

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What is a billing cycle anchor?

A billing cycle anchor is a specific datetime that determines when recurring billing periods start and end. Instead of billing based on the subscription creation date, the anchor ensures consistent, predictable billing on specific days.

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Why billing anchors matter

Without billing anchors, subscriptions created on different days bill on different days:
  • Administrative overhead — processing payments scattered throughout the month
  • Customer confusion — unpredictable billing dates make budgeting difficult
  • Contractual requirements — some agreements require billing on specific dates
  • Proration complexity — mid-cycle upgrades and downgrades become harder without clear period boundaries

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Proration behaviors

Subscriptions support three proration behaviors to handle the period between creation and the billing anchor:
BehaviorDescription
create_prorations (default)Creates a prorated charge for the partial period when the subscription starts before the billing anchor
always_invoiceAlways creates an immediate invoice regardless of timing
noneNo proration. If a billing anchor is set, waits for the anchor date. If no anchor is set, charges immediately at full price

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Proration calculations

The system calculates prorated amounts with appropriate precision for each interval:
  • Daily — prorated by hours (for exact time-based billing)
  • Weekly — prorated by days
  • Monthly — prorated by days, accounting for varying month lengths
  • Yearly — prorated by days, handling leap years

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Month-end anchor handling

Special logic handles billing anchors set to days 29-31:
  • Month-end normalization — a billing anchor on the 31st bills on the last day of shorter months (e.g., Feb 28/29, Apr 30)
  • Leap year support — February 29 anchors correctly handle non-leap years
  • Consistent behavior — ensures predictable billing even with varying month lengths

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Time preservation

For subscriptions with daily intervals, the exact time of the billing anchor is preserved, enabling precise hourly billing for services that require it.

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Scenarios

Subscription created: January 15, 2024
Billing anchor: January 31, 2024
Proration behavior: create_prorations

Timeline:
- Jan 15: Prorated invoice for Jan 15-31 ($54.84 for a $100/month plan)
          Calculated as: ($100 / 31 days) x 17 days = $54.84
- Jan 31: First full invoice for Feb 1-29 ($100)
- Feb 29: Invoice for March ($100)
- Mar 31: Invoice for April ($100)
Fair billing where customers only pay for what they use.
Consolidate all customer billing to the 1st of each month.Without billing anchors:
Customer A joins March 15 -> Bills on the 15th of each month
Customer B joins March 22 -> Bills on the 22nd of each month
Customer C joins March 28 -> Bills on the 28th of each month
Result: Scattered billing throughout the month
With billing anchors (anchor = April 1, 2024):
Customer A (joins March 15):
- March 15: Prorated invoice for Mar 15-31 (17 days = $54.84 on $100/month plan)
- April 1: Full invoice for April ($100)
- May 1, June 1, etc.: Regular monthly billing ($100)

Customer B (joins March 22):
- March 22: Prorated invoice for Mar 22-31 (10 days = $32.26 on $100/month plan)
- April 1: Full invoice for April ($100)
- May 1, June 1, etc.: Regular monthly billing ($100)

Customer C (joins March 28):
- March 28: Prorated invoice for Mar 28-31 (4 days = $12.90 on $100/month plan)
- April 1: Full invoice for April ($100)
- May 1, June 1, etc.: Regular monthly billing ($100)
Enterprise contract requiring billing on the 15th of each month.
Subscription created: June 5, 2024
Billing anchor: June 15, 2024

Timeline:
- Jun 5: Prorated charge for Jun 5-15 ($36.67 for $100/month plan)
         Calculated as: ($100 / 30 days) x 11 days = $36.67
- Jun 15: First full monthly charge ($100)
- Jul 15, Aug 15, etc.: Regular monthly billing ($100)
Online course or digital product with immediate full access.
Subscription created: March 20, 2024
Billing anchor: April 1, 2024
Proration behavior: always_invoice

Timeline:
- Mar 20: Immediate full invoice ($100) -- customer gets instant access
- Apr 1: Next regular invoice ($100)
- May 1, June 1, etc.: Regular monthly billing ($100)
The customer pays full price on both signup and at the anchor date. This is intentional for immediate-access products.
Gym membership at full price regardless of join date.With billing anchor (waits for anchor):
Subscription created: January 5, 2024
Billing anchor: January 31, 2024

Timeline:
- Jan 5: No immediate invoice (waits for anchor)
- Jan 31: First full monthly charge ($100)
- Feb 29, Mar 31, etc.: Regular monthly billing ($100)
Without billing anchor (immediate charge):
Subscription created: January 5, 2024
Billing anchor: not set

Timeline:
- Jan 5: Immediate full monthly charge ($100)
- Feb 5, Mar 5, etc.: Regular monthly billing ($100)
With the none behavior:
  • If billing_cycle_anchor is set, the system waits for the anchor date
  • If billing_cycle_anchor is not set, the system charges immediately at full price
14-day free trial, then monthly billing.
Subscription created: March 1, 2024
Billing anchor: March 15, 2024 (14 days later)
Proration behavior: none

Timeline:
- Mar 1: No invoice (trial period starts)
- Mar 1-14: Free trial period, full access
- Mar 15: First full monthly charge ($100)
- Apr 15, May 15, etc.: Regular monthly billing ($100)

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Implementation details

The billing anchor functionality is implemented through:
  • Database field — billing_cycle_anchor (datetime) on subscriptions
  • Calculation method — calculate_next_billing_date_from_anchor handles date logic including month-end normalization
  • Invoice generation — GenerateInvoicesJob respects anchors and prevents duplicates
  • Initial invoices — generate_initial_invoice creates prorated or full charges based on the proration behavior

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Implementing consolidated billing

To achieve company-wide billing on specific days:
For SaaS platforms, create_prorations is the most common choice. It ensures fair billing while aligning all customers to the same billing date.
Option 1: Manual setting Staff explicitly set billing_cycle_anchor when creating subscriptions. Option 2: Business logic layer 
def create_subscription_for_customer(customer, plan)
  # Company policy: all subscriptions bill on the 1st
  next_first = Date.today.beginning_of_month
  next_first = next_first.next_month if Date.today.day > 1

  Subscription.create!(
    customer: customer,
    billing_cycle_anchor: next_first,
    proration_behavior: 'create_prorations',
    # ... other subscription setup
  )
end
Option 3: Account-level default Add a default_billing_day field to the Account model to automatically set anchors for all new subscriptions.

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Best practices

  1. Set anchors thoughtfully — consider your business operations and customer expectations
  2. Communicate clearly — inform customers about proration and billing dates
  3. Test edge cases — verify behavior around month-ends and leap years
  4. Choose the right proration behavior:
    • SaaS platforms often use create_prorations
    • Membership sites might prefer none for simplicity
    • Immediate access services benefit from always_invoice

Subscriptions

Multi-phase subscriptions with flexible pricing and automatic transitions.

Invoice generation

How invoices are automatically generated from subscriptions.