Overview of Billable Units in Pricing
Billable units are an essential part of defining how products and services are billed in a pricing structure. They are particularly useful when you need to bill based on a fraction or multiple of a unit of measure (UOM). By specifying billable units on a price option, you can accurately calculate charges and quantities on invoices, ensuring an automated and precise billing process.
In this article, we’ll walk you through how to define and modify Billable Units for a price option.
How to Change or Add Billable Units
To start working with billable units, follow these steps:
Navigate to Pricing Settings
Go to the Management section, then select Billing Setup, and choose Pricing from the options.Select a Price Option
If you're creating a new price option, click the plus sign to add a new one. Alternatively, you can select an existing price option to modify.Locate the Billable Units Field
Within the selected price option, you will find the Billable Units field. This is where you can define the applicable multiplier for this specific price option.Define the Billable Units
In the Billable Units field, enter the value that indicates how the charges will be calculated. This value determines the multiplier used when calculating the charge amount and the quantity on the invoice.
How Billable Units Impact Invoice Calculations
Billable Units play a crucial role in determining the final Charge and Quantity for an invoice.
Charge Calculation:
The total charge for an invoice is calculated using the formula:Charge = (Items delivered * UOM) / Billable Units * Price Option Charge
Quantity Calculation:
The quantity on the invoice is determined by this formula:Quantity = (Items delivered * UOM) / Billable Units
Here, Items delivered refers to the number of products or services provided, and UOM refers to the Unit of Measure, which is defined for the item in the product catalog in the Billing UOM field.
Example of Using Billable Units
Let’s consider an example to better understand how Billable Units function in practice.
Imagine you are selling a product with a defined 300 Calorie Billing UOM. You need to bill a certain amount based on every 100 calories provided when delivering the product.
In the Price Option:
You would enter 100 as the value for Billable Units. This means you will charge for every 100 calories delivered.In the Product Catalog:
The UOM for the product would be set to 300, as each product has a 300-calorie unit measure.
How the Calculation Works in This Example
Charge Calculation:
If you deliver one product (300 calories), the charge would be calculated as:Charge = (1 item * 300 calories) / 100 Billable Units * Price Option Charge
The price for 100 calories is applied based on your price option.Quantity Calculation:
The quantity of billable units would be calculated as:Quantity = (1 item * 300 calories) / 100 Billable Units
In this case, the quantity would be 3 billable units (since 300 calories divided by 100 calories equals 3).
By defining Billable Units and using the appropriate Billing UOM, you ensure that your invoices reflect accurate charges based on the desired units supplied.
In many cases, there is often a direct correlation between the Billing UOM (Unit of Measure) defined on the item level and the Billable Units set in the price option and both of these values are set to 1, and here's what this means in practical terms:
Billing UOM Defined on the Item Level (1):
The Billing UOM represents the standard billing unit of measure used to quantify the product or service being billed. Setting the Billing UOM to 1 means that each product is treated as a single, indivisible unit.Billable Units in the Price Option (1):
The Billable Units define how the product or service is billed in terms of units on the price option level. Setting this to 1 means that each instance of the product being delivered corresponds to one billable unit being charged for.
Billable Units allow for greater flexibility in how products and services are priced, especially when the unit of measure doesn’t match the billing unit. By configuring Billable Units in your price options, you can create more accurate invoices and ensure proper billing.