A minimum charge is a predefined threshold amount set to ensure that the total cost of an invoice or specific line items within an invoice meets or exceeds a specified minimum threshold. This practice helps to establish a baseline level of revenue and ensures that the costs associated with using your product or service are appropriately covered. Minimum charges are a valuable tool for businesses to maintain pricing consistency and fairness while accommodating a variety of customer needs.
Minimum charges can be applied at two levels: at the invoice total or at the metered component level, allowing you to have granular control over your pricing structure.
Invoice total minimum charges operate by setting a threshold for the total invoice amount. If the total of an invoice falls below this minimum, Octane automatically adds a line item to the invoice to cover the difference and ensure the invoice meets the specified minimum charge.
Metered component minimum charges allow you to set a minimum threshold for specific metered components, ensuring that customers are billed a minimum amount for their usage of a particular resource or metric. This approach is particularly useful when you want to enforce minimum charges for specific aspects of your service while allowing flexibility in other areas.
You can also combine invoice total minimum charges with minimums set at the metered component level. In this scenario, the metered component minimums contribute towards meeting the invoice total minimum.
Example: Let's say you charge for API requests at $1 per request and Throughput at $1 per gigabyte. If the API request minimum is set at $100 and the invoice total minimum is $500, here's how it works:
- The customer uses 50 API requests, totaling $50.
- They consume 100 GB of throughput, amounting to $100.
- The minimum difference from the API request charge is $50.
- The invoice total minimum difference is $500 - $200 (API request charge + API requests minimum difference + Throughput charge) = $300.
- Therefore, the customer will be charged $500 ($50 API request charge + $50 API request minimum difference + $100 Throughput charge + $300 invoice total minimum difference).
By default, minimum charges are set to align with your price plan's billing frequency. However, Octane offers the flexibility to customize these minimum charge frequencies to suit your specific business needs. You can configure your minimum charge frequency to be a multiple of your price plan's billing frequency. For instance, while you may charge usage fees on a monthly basis, your contract might stipulate an annual minimum. In this scenario, if the total spend has not met the specified annual amount by the end of the year, Octane will automatically include a line item on the last invoice of the year to cover the remaining difference, ensuring that your minimum charge requirements are met. This can apply to both invoice total minimums or metered component minimums.
Octane offers a convenient feature that allows you to implement price changes when a minimum charge threshold is reached. This feature is specifically designed for metered component minimum charges. Once the metered component's minimum charge is crossed, you have the flexibility to specify a percentage increase or decrease in the price. From that point forward, all usage after the minimum charge is crossed will be priced accounting for the specified percentage change. It's worth noting that Octane's pricing granularity operates at the hourly level. This means that if the minimum charge threshold is crossed at 01:30, the new pricing will apply to all usage starting from 01:00, ensuring accurate and dynamic pricing adjustments.
Octane offers the option to hide line items when minimum charges are applied. Enabling the "Hide Line Items Below Minimum Charge" setting in the Settings -> Invoicing & Payments section ensures that only line items exceeding the minimum charge threshold are displayed to end customers.