Client Rate Proration & Prior Period Adjustments

When you change a service and that change affects the client’s rate, Discovery automatically handles proration and — when needed — creates an adjustment so billing stays accurate.

This guide explains what happens and what you’ll see.

The Basics

Discovery prorates service charges by day.

For services billed monthly, quarterly, or yearly, the system:

  • Breaks the rate into a daily amount
  • Applies the correct rate to each day in the billing period
  • Adds those daily amounts together for the invoice

When you enter a service change, you choose a Date of Change. That date tells the system when the new rate should start.

Two Different Outcomes

What happens next depends on whether the affected time period has already been invoiced.

If the period has NOT been invoiced yet

Discovery automatically:

  • Uses the old rate before the change date
  • Uses the new rate after the change date
  • Prorates the invoice line item

No extra adjustment line is needed.

If the period WAS already invoiced

Discovery does not change old invoices.

Instead, it may suggest a Prior Period Adjustment (PPA) line item on the next invoice to correct the difference.

What You’ll See When Entering a Change Date

Retroactive date (in the past)

If you enter a Date of Change in the past, you’ll see a notice explaining that:

  • The service is being corrected retroactively
  • Existing invoices will not be edited

If that past period was already billed, Discovery will also show a Prior Period Adjustment section with a suggested prorated amount.

Prior Period Adjustment prompt shown when a pricing change is entered with a past effective date.

Future date

If you enter a Date of Change in the future, you’ll see a notice explaining that:

  • This is a scheduled change
  • The new rate won’t apply until that future date

No adjustment is usually needed because nothing has been billed yet.

Prior Period Adjustments (PPA)

A Prior Period Adjustment is a separate line item added to the next invoice to correct past billing when a rate change is entered after invoicing already happened.

The adjustment can be:

  • An extra charge — if the new rate is higher
  • A credit — if the new rate is lower

When shown, the PPA section includes:

  • A suggested prorated amount
  • A default description
  • An editable amount field

You can:

  • Accept the suggested amount
  • Edit the amount
  • Enter $0.00 to skip the adjustment

How a Prior Period Adjustment Appears on the Invoice

When used, the Prior Period Adjustment is added as its own line item on the next client invoice. It does not change the original service line.

Example of a Prior Period Adjustment line item on an invoice

Simple Examples

Example — Retroactive Rate Increase

  • Old rate: $200/month
  • New rate: $260/month
  • Change date entered: mid-month
  • That month already invoiced

Result:

  • Original invoice stays the same
  • The difference is calculated for the affected days
  • A Prior Period Adjustment charge is added to the next invoice

Example — Retroactive Rate Decrease

  • Old rate: $200/month
  • New rate: $170/month
  • Change date entered: mid-month
  • That month already invoiced

Result:

  • Original invoice stays the same
  • The overbilled portion is calculated
  • A Prior Period Adjustment credit is added to the next invoice

Example — Future Rate Change

  • Old rate: $200/month
  • New rate: $260/month
  • Change date in the future
  • That month NOT invoiced yet

Result:

  • The future invoice is automatically prorated
  • Part of the period uses the old rate
  • Part uses the new rate
  • No adjustment line is needed

Important Notes

  • Proration is calculated by day
  • Existing invoice line items are never automatically edited
  • Prior Period Adjustments are used to correct already-billed time
  • You can set the adjustment amount to $0.00 if you do not want to include it

If you have additional questions or need more in depth information, please feel free to send us a message using the help beacon in the lower right-hand corner.

Related Articles