How advanced usage-based billing worksPrivate preview

SaaS and AI businesses often want to charge customers based on the usage of their product while also charging recurring fees up front and offering recurring credits. With advanced usage-based billing, you can:

• Define and charge customers based on specific usage data attributes (dimensions)
• Manage dozens to hundreds of rates across one or many meters
• Set up real-time credit burndown and automate credit issuance
• Manage price migrations

Supported pricing models include:

• Pay as you go
• Flat fee and overages
• Real-time credit burndown with top-ups

With advanced usage-based billing, you charge customers based on the usage of their product while also charging flat recurring fees and burning down credits.

Advanced usage-based billing concepts

Here are the key concepts for understanding how advanced usage-based billing works.

Pricing plan concepts

You use pricing plans to group a set of pricing components into a single package that you can charge for. You subscribe customers to one pricing plan that contains one or more components for usage-based pricing, recurring fees, or recurring credits. You can modify existing components or add new ones to pricing plans to create new versions of that plan and choose whether to migrate existing customers to the latest version or not.

A pricing plan can contain any combination of:

• A rate card
• A license fee
• A service action

Here’s what a pricing plan looks like with all of its components.

A pricing plan with a rate card, license fee, and service action.

Here’s an example of what a complete pricing plan looks like with Checkout. Learn how to use Checkout to subscribe customers to a pricing plan.

A pricing plan displayed in Stripe Checkout

Pricing plan versioning

Pricing plans support versioning to manage changes to your billing structure over time. Each version of a pricing plan is immutable. When you update a pricing plan by modifying or deleting existing components, a new version is created. Adding a license fee or service action creates a new version. Adding a rate card doesn’t create a new version. This versioning system helps you:

• Schedule and communicate pricing changes to customers.
• Manage different pricing for various customer segments.
• Track and maintain a history of your pricing models.

Each pricing plan has two version properties:

• latest_version: This is the most recent version after updates.
• live_version: This is the version used by default for new subscriptions unless a specific version is provided.

Pricing plan subscription concepts

Here are the key concepts for understanding how pricing plan subscriptions work.

Rate card concepts

Here are the key concepts for understanding how rate cards work.

License fee concepts

Service action concepts

Lifecycle

Here’s what the lifecycle of a pricing plan looks like:

1. You create the pricing plan, which can include rate cards, license fees, and service actions.
2. Subscribe a customer to the pricing plan using Checkout or the API.
3. Usage is recorded and aggregated for each service interval.
4. An invoice is created for the subscription according to the billing interval.
5. The customer’s payment method is charged.

Billing interval and service interval

The billing interval defines when you generate invoices. The generated invoice consolidates charges that have accrued during one or more service intervals. You can configure different billing intervals to match your business model and pricing structures. You must configure the service interval to be shorter than the billing interval. For example, you can configure a weekly service interval on a monthly cadence but not a monthly service interval on a weekly cadence.

When a service interval ends, Stripe calculates charges based on usage and recurring fees during that period (for example, a customer’s usage for the past week). These charges are added to the customer’s account but isn’t necessarily billed immediately.

When a billing interval ends, all accrued charges since the last billing interval are compiled into an invoice and sent to the customer.

This separation allows for flexible billing arrangements, such as monthly service measurement with yearly invoicing, or daily service measurement with weekly billing.

Examples

Customers are only billed for completed service intervals. If a customer is billed while a service interval is still accruing usage, the pricing plan subscription only includes the usage from the previous service interval. Any new usage is added to the invoice for the next billing interval.

License fees are billed in advance for any service interval that started during the billing interval.

Service interval of 5 months with an annual billing interval

In this example, a business has the following setup:

• Service interval: Every 5 months
• Billing interval: Every year on March 31

The customer is only billed for the completed service intervals within the annual billing interval. In this example, the invoice is for 10 months of usage, representing the two completed service intervals.

With a 5-month service interval and annual billing interval, the customer is only billed for the completed service intervals.

Set up a separate billing interval and service interval

You can provide customers with more frequent usage periods by assessing usage on a weekly basis (this is the service interval). However, to reduce administrative overhead, you might only want to generate invoices on a monthly basis (this is the billing interval).

Defining the service interval and billing interval separately gives you the flexibility to aggregate usage and provision access at one frequency (for example, weekly) but bill customers at another (for example, monthly). This can help to optimize your cash flow.

Revenue Recognition

Revenue Recognition for usage-based billing ensures that you have accurate financial reporting while enabling your AI or SaaS business to leverage flexible, consumption-based pricing models. It follows a delivery-based approach where revenue is recognized when the service is actually delivered or consumed, not when it’s sold or invoiced.

Revenue Recognition has two key components:

• Sales transaction: Records the sale of usage-based services and when the service was actually consumed.
• Invoice line items: Records when the customer was billed.

How revenue recognition works with usage-based billing

With usage-based billing, revenue recognition has three main stages:

• Revenue accrual: Revenue is recognized at the time of delivery, based on the actual consumption of services.
• Revenue reversal: When invoices are finalized, a revenue reversal on the original revenue accrual occurs. This step is essential for ensuring the revenue recognition accurately reflects the amounts billed to the customer.
• Rebooking the invoice: When the invoice is finalized, rebooking the invoice involves recognizing the actual treatment against the invoiced amount.

Example

In this example, a customer consumes 100 USD worth of API calls over 3 months, then gets billed:

• January (Revenue accrual): In the first month, they consume 40 USD worth of API calls.
• February (Revenue accrual): In the second month, they consume 35 USD worth of API calls.
• March (Revenue accrual): In the third month, they consume 25 USD worth of API calls.
• April (Revenue reversal and rebooking of the invoice): After three months, the customer receives an invoice for 100 USD (their total usage).
• May (Payment): The customer pays the invoice of 100 USD.

Limitations

Using Revenue Recognition with usage-based billing has the following limitations during private preview:

• Meters using last or max aggregation types are currently not supported.
• Advanced usage-based billing uses billable_items, which aren’t fully supported in the current reports.
• Journal entries for usage-based billing transactions display the billable_item ID as the product ID. However, product details such as product name, description, and other attributes appear empty in reports.

Automatic tax

You can enable automatic tax on pricing plan subscriptions by using Stripe Checkout or by directly using the API.

curl https://api.stripe.com/v1/checkout/sessions \
  -u "
sk_test_BQokikJOvBiI2HlWgH4olfQ2
:" \
  -H "Stripe-Version: 2025-09-30.preview;checkout_product_catalog_preview=v1" \
  -d customer={{CUSTOMER_ID}} \
  -d "checkout_items[0][type]"=pricing_plan_subscription_item \
  -d "checkout_items[0][pricing_plan_subscription_item][pricing_plan]"={{PRICING_PLAN_ID}} \
  -d "checkout_items[0][pricing_plan_subscription_item][component_configurations][{{LICENSE_COMPONENT_ID}}][type]"=license_fee_component \
  -d "checkout_items[0][pricing_plan_subscription_item][component_configurations][{{LICENSE_COMPONENT_ID}}][license_fee_component][quantity]"=1 \
  -d "automatic_tax[enabled]"=true