Usage Based Billing

Startups face unexpected setbacks when implementing usage based pricing. Flowglad has designed usage based pricing to abstract away as much complexity as possible.

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The Usage Data Model

At Flowglad, we’ve designed a flexible system to help you implement usage-based billing. Here’s a breakdown of the key components and how they work together. Think of it like measuring water consumption:

1. Usage Meters: This is the central measuring device. For every type of usage you want to track (e.g., API calls, data storage, active users), you’ll create a Usage Meter. It’s like installing a specific water meter for your main water line, another for your garden hose, etc. Each meter has an Aggregation Type that determines how usage is calculated.

2. Prices (Usage Type): Once you have a meter, you need to define how much to charge for what it measures. A Price of type “Usage” links directly to a Usage Meter. It sets the cost per unit of usage (e.g., $0.01 per API call,$5 per GB of storage). Multiple prices can be associated with a single usage meter, allowing for different pricing tiers or plans.

3. Subscriptions: When a customer signs up for a product or service that has usage-based components, they are subscribed to one of these “Usage” Prices. This links the customer to the specific way their consumption will be measured and billed.

4. Usage Events: These are the individual records of consumption. Every time a customer performs a billable action (e.g., makes an API call, an active user logs in), a Usage Event is recorded. Each event is tied to:

   • The Customer
   • Their Subscription
   • The specific Price they are subscribed to
   • And, through the price, the relevant Usage Meter

How Usage is Aggregated

Usage Meters collect all the Usage Events and aggregate them based on the chosen Aggregation Type for a billing period:

• Sum: This is the simplest model. It adds up the amount from all usage events. For example, if a customer makes 100 API calls, and each Usage Event has an amount of 1, the total aggregated usage is 100. This is ideal for things like tokens consumed, messages sent, or data processed.
• Count Distinct Properties: This model counts the unique values of a specific property within the Usage Events. For instance, to bill for “monthly active users,” you’d send a Usage Event each time a user is active, including a userId in the properties field. The meter would then count the number of unique userIds within the billing period. This is great for MAUs, unique workspace users, etc.

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Setting Up and Using Usage-Based Billing

Here’s how to get started with tracking and billing for usage:

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Step 1: Create a Usage Meter

1. Navigate to the “Usage Meters” section in your Flowglad dashboard.
   This section is only visible if the “Usage” feature flag is enabled for your organization.
2. Click “Create Usage Meter.”
3. Give your meter a descriptive name (e.g., “API Calls,” “Active Users”).
4. Select the Aggregation Type:
   • Sum: To add up values from usage events.
   • Count Distinct Properties: To count unique property values. If you choose this, you’ll also need to specify the property_name you’ll be sending in your usage events (e.g., userId, email).
5. Save the meter. You’ll need its id for the next step.

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Step 2: Create a Usage Price

1. Go to “Products” and select the Product this usage component will belong to, or create a new one.
2. Within the Product, go to the “Prices” section and click “Create Price.”
3. Set the Type to “Usage”.
4. Fill in the price details (name, unit price, currency, interval, etc.).
5. Crucially, select the Usage Meter you created in Step 1 from the Usage Meter Id dropdown. This links this price to that specific meter.
6. Save the price.

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Step 3: Create a Usage Subscription

Customers subscribe to this “Usage” Price just like any other Flowglad price. You can use:

• Checkout Sessions: Integrate Flowglad’s checkout, and customers can select plans that include your new usage price.
• Direct API Calls: Create subscriptions directly via the API if you have a custom subscription flow.

Once a customer is subscribed to a usage price, their SubscriptionId becomes key for reporting their usage.

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Step 4: Report Usage Events

Reporting usage is done via API calls from your backend. This is to ensure data integrity and security, as you’ll be verifying and sending financial data.

You’ll use the FlowgladServer.createUsageEvent method. Here’s a TypeScript example of how you might do this in a Node.js backend:

import { FlowgladServer } from '@flowglad/server'; // Adjust import based on your setup

// Initialize FlowgladServer with your API key and any other necessary params
// This might be done once in your server setup
const flowglad = new FlowgladServer({
  apiKey: process.env.FLOWGLAD_API_KEY!,
  // other params like getRequestingCustomer if needed by your auth model
});

export const reportUsage = async (data: {
  customerId: string;       // The Flowglad Customer ID
  subscriptionId: string;   // The ID of the usage subscription
  priceId: string;          // The ID of the specific usage price
  usageMeterId: string;     // The ID of the usage meter this event applies to
  amount: number;           // The quantity of usage (for 'sum' aggregation)
  transactionId: string;    // A unique ID from your system to ensure idempotency
  usageDate?: Date;         // Optional: Defaults to now. Date usage occurred.
  properties?: Record<string, any>; // Optional: For 'count_distinct_properties'
                                   // e.g., { "userId": "user_123" }
}) => {
  try {
    const usageEventPayload = {
      customerId: data.customerId,
      subscriptionId: data.subscriptionId,
      priceId: data.priceId,
      usageMeterId: data.usageMeterId,
      amount: data.amount,
      transactionId: data.transactionId,
      ...(data.usageDate && { usageDate: data.usageDate.getTime() }), // Send as milliseconds
      ...(data.properties && { properties: data.properties }),
    };

    const result = await flowglad.createUsageEvent(usageEventPayload);

    console.log('Usage event created successfully:', result.usageEvent.id);
    return result.usageEvent;
  } catch (error) {
    console.error('Failed to create usage event:', error);
    // Handle error appropriately
    throw error;
  }
};

// Example usage:
/*
reportUsage({
  customerId: 'cust_xyz789',
  subscriptionId: 'sub_abc123',
  priceId: 'price_jkl456',
  usageMeterId: 'um_ghi789',
  amount: 10, // e.g., 10 API calls
  transactionId: 'my-unique-transaction-id-12345',
  // properties: { "userId": "user_qwerty" } // If using count_distinct_properties
}).catch(e => console.error(e));
*/

Key parameters for createUsageEvent:

• customerId: The ID of the customer who incurred the usage.
• subscriptionId: The ID of their active usage subscription.
• priceId: The ID of the specific usage price associated with their subscription and this event.
• usageMeterId: The ID of the usage meter this event should be recorded against.
• amount: For sum aggregation, this is the quantity of usage (e.g., number of API calls, megabytes transferred). For count_distinct_properties, this is often 1, as the uniqueness is determined by the properties.
• transactionId: Crucial for idempotency. This should be a unique ID generated by your system for each usage event. If Flowglad receives a createUsageEvent call with a transactionId it has already processed for that usageMeterId, it will not create a duplicate event.
• usageDate (optional): Timestamp (in milliseconds since epoch) of when the usage occurred. Defaults to the time of the API call. If usage occurs outside the current billing period, it will still be attached to the current open billing period for that subscription.
• properties (optional): A JSON object. Required if the linked Usage Meter has an Aggregation Type of count_distinct_properties. This object should contain the property you want to count distinct values of (e.g., { "userId": "some_unique_user_id" }).

By following these steps, you can effectively model, track, and bill for various types of usage with Flowglad. Remember that usage events roll up and are used to calculate charges at the end of each billing period.