Proration
Adjusting a charge for a partial period — for example, when a customer upgrades mid-cycle and only owes for the days remaining.
Proration is adjusting a charge to reflect a partial billing period — most commonly when a customer changes plans mid-cycle and should only be charged (or credited) for the days actually spent on each plan, not a full period on either one.
It matters because without proration, a mid-cycle upgrade either overcharges the customer for time they didn't use on the new plan, or undercharges the business for time they did use on it — both outcomes erode trust or leave money on the table, and either way finance ends up fielding 'why was I charged this much' questions.
In practice, proration works by splitting the billing period at the moment of change: the customer is credited for the unused portion of their old plan and charged for the remaining portion of the new one, calculated down to the day (or sometimes the hour) the change took effect, then rolled into the next invoice as separate line items.
The common pitfall is applying proration inconsistently between upgrades and downgrades — some products fully prorate an upgrade (charging immediately for the difference) but only apply a downgrade at the next renewal instead of prorating it too, which is a defensible business choice but needs to be stated clearly, since an unexplained asymmetry reads as a bug to a customer comparing the two situations.