Line item: minimum commitments
This page explains how a customer commits to pay at least a set amount or quantity, on one line item or across several products of a contract.Map of concepts
Related modules
Minimum commitments uses the following modules:Minimum commitments: the least that a customer pays
A minimum commitment is the least amount or quantity that a customer pays for in a commitment period, whatever the actual usage. A commitment period is the period over which Zenskar compares the actual usage or spend with the minimum. A shortfall is the difference between the minimum and the actual usage or spend in a commitment period. Zenskar bills the shortfall. For example, a customer commits to a spend of $1,200 a year. The actual charges for the year are $1,000. The shortfall is $200, and Zenskar bills it. If the actual charges are $1,500, there is no shortfall. A shortfall is a charge, not a balance. Nothing carries forward to the next commitment period. A minimum commitment applies either to one line item or to several products of a contract together. See Line-item minimum commitments and Contract-level minimum commitments.Line-item minimum commitments: a floor on one line item
A line-item minimum commitment is a minimum commitment on one line item. A line-item minimum commitment measures either spend or quantity. A minimum-spend commitment is a line-item minimum commitment on the amount that the line item charges. A minimum-quantity commitment is a line-item minimum commitment on the number of units of the line item. A line item can carry several line-item minimum commitments, each with its own dates within the line-item duration. Each one has a minimum value, a commitment period, and an optional label. A line-item minimum commitment applies before the discounts of the line item.Partial periods
When a line-item minimum commitment starts or ends partway through a commitment period, it handles the partial period in one of two ways:Evaluation modes
An evaluation mode is the rule that decides when Zenskar checks the minimum and bills the shortfall within a commitment period. A commitment period can span several billing periods, such as an annual commitment with monthly billing. Each billing period then has an equal share of the minimum. A line-item minimum commitment uses one of two evaluation modes:
For example, a customer commits to $300 a quarter, billed monthly. The share of each month is $100. The charges are $150 in January, $50 in February, and $100 in March.
- With the cumulative evaluation mode, the quarter totals $300, so there is no shortfall.
- With the greedy evaluation mode, February falls $50 short of its share, and Zenskar bills a shortfall of $50 for February.
Rules for line-item minimum commitments
- A minimum-spend commitment cannot apply to prepaid billing.
- The commitment period must be a whole multiple of the billing cadence.
- For a period-of-time product with the recurring quantity strategy, the commitment period of a minimum-quantity commitment must equal the quantity cadence.
- A line item whose pricing preset uses the dimensional pricing model cannot carry minimum commitments.
Contract-level minimum commitments
A contract-level minimum commitment is a minimum commitment on the total spend of several products of a contract. For example, a customer commits to $100,000 a year across API calls, a platform fee, and support. With line-item minimum commitments, each product would need its own minimum, and a strong product could not make up for a weak one. A covered product is a product whose charges count toward a contract-level minimum commitment. The coverage of a contract-level minimum commitment is one of two options:
A contract-level minimum commitment has a minimum amount in the currency of the contract, a commitment period, and a start date. The end date is optional. The minimum applies to the charges of the covered products after the discounts of their line items, and before tax.
Evaluation modes for contract-level minimum commitments
A contract-level minimum commitment uses one of two evaluation modes:
With the greedy evaluation mode, a later invoice can exceed its share. Zenskar then credits back, on that invoice, the top-ups already billed in the same commitment period. The greedy evaluation mode is available only when all covered products have the same billing cadence.
Partial periods for contract-level minimum commitments
When a contract-level minimum commitment starts or ends partway through a commitment period, it handles the partial period in one of two ways:Shortfall on the invoice
The shortfall of a contract-level minimum commitment appears on the invoice in one of two ways:
The greedy evaluation mode can only show the shortfall as one line, because it sets the minimum per invoice, not per product.
Under each covered product, the shortfall splits in one of two ways:
For example, a customer commits to $120,000 a year. The covered charges for the year are API calls $50,000, platform fee $30,000, and support $20,000. The shortfall is $20,000. With the proportional split, API calls carry $10,000, platform fee $6,000, and support $4,000.
With selected products, the shortfall lines under each covered product require a label. The label appears on the shortfall lines.
A carrier product is a product on the contract that shows the shortfall of a contract-level minimum commitment as its own invoice line. The shortfall replaces the charges of the carrier product. The carrier product is never a covered product. The UI suggests a product with a price of $0 and a quantity of 1. A carrier product must meet these conditions:
- It is a point-in-time product, billed postpaid with the per-unit pricing model.
- It is on the contract only once, and has no minimum commitments of its own.
- Its line-item dates cover the dates of the contract-level minimum commitment.
- With the true-up evaluation mode, its billing cadence divides the commitment period evenly. With the greedy evaluation mode, its billing cadence equals the billing cadence of the covered products.
Rules for contract-level minimum commitments
- Every covered product must be billed postpaid, because a shortfall is measured on charges already billed.
- Every covered product must be on the contract only once.
- The commitment period must be a whole multiple of the interval at which all covered products end a billing period together.
- The start date and the end date must fall on billing-period boundaries of every covered product.
- A contract can have only one contract-level minimum commitment that covers everything on the contract.
- A product can be selected for only one contract-level minimum commitment.