Pricing for scale: Closing upmarket deals with enterprise commitments

One very attractive part of usage-based billing is flexibility. Smaller companies often gravitate toward “only pay for what you use” messaging that keeps them free from heavyweight contracts and reduces their risk of burning through funding. They don’t need volume discounts, they need freedom. And so young products and PLG companies tend to lean into flexible usage at fixed costs.

But as you move upmarket and seek enterprise, sales-led deals, the script tends to flip. Large finance and procurement teams value knowing how much they need to budget, and your own reps start craving more commercial flexibility to discount and get bigger deals signed faster. Variable rates at fixed usage become the priority.

One of the primary contract structures that companies are using to facilitate this growth is enterprise commitments. The basic mechanics are relatively simple: a customer agrees to a defined level of usage at a locked-in rate, often a discounted one. These can be prepaid or postpaid, with defined rules for unused allocations or overages.

Today, Orb is going live with native support for enterprise commitments. In this post, we’ll describe how we’ve built these to facilitate our customers’ journey upmarket and give them the building blocks to sign and keep bigger customers.

How commitments accelerate growth

As your growth begins to accelerate, cash flow and collections can strain resources

A growing customer can create significant costs before it creates predictable cash flow. You may owe infrastructure, model, data, or other service providers well before a customer invoice is paid. And bigger customers who know they have leverage tend to pay on their own schedule, not yours.

Prepaid commitments are a key mechanism for moving cash closer to the start of the contract. When the customer has paid in advance, you reduce the cash flow stress on your company, and your finance team will thank you for removing the manual work of collecting on late invoices.

As your company matures, forecasting and audit-readiness come under scrutiny

As your company prepares to raise a big round or shore up finances for an exit, the burden of transparency increases. Investors want to see you forecast and then hit projections. And every invoice needs to be defensible to have a bulletproof audit trail.

Commitments provide a way to handle both needs. Whether pre or postpaid, commitments remove the question marks that often come with charging for variable usage. And if you’re working with a billing provider that can accurately pass credit drawdown data to revenue accounting systems, the revenue recognition woes of usage-based billing become simple line items that won’t raise audit flags.

Commercial conversations at the enterprise level need aligned incentives

Usage-based pricing gives a company room to grow with its customers. But scaling your fees perfectly with their revenue can also make a successful customer feel penalized, as though your product is a tax on their success.

Commitments give sales teams another way to structure the conversation. A customer can commit to more spend in exchange for better unit economics. The vendor gets a clearer path to expansion, while the customer gets terms that recognize the value of growing with the product.

This matters at renewal, but it also matters earlier in the relationship. A commitment gives the account team a way to plan for the customer’s next stage of adoption instead of renegotiating the commercial model every time usage changes.

How commitments come to life

If you’re thinking about implementing commitments in your own contracts, here are two pathways to follow.

Prepaid commitments: fund a balance and define the rollover rules

A prepaid commitment is a good fit when the vendor needs cash up front, the customer has a budget to allocate, and usage is expected to vary over the term. Here’s how it works:

• The contract specifies a commit amount at a specified rate, often making it clear how much value the customer is getting in discounts
• The customer pays in advance for a pool of value, then usage draws down that balance over time.
• That balance is often allocated monthly, so that the customer draws down chunks of usage at a steady rate
• If that allocation is not used, the vendor sets rules around what rolls over and what expires. Most will set a limit on usage that can rollover into the next month.

Before implementing a prepaid commitment, answer these questions:

• Which products, prices, or usage types draw from the balance?
• How is the discount represented and explained to the customer?
• When does the balance become available, and how is drawdown reported?
• What happens to unused value at the end of each period and at the end of the term?
• What happens when the balance is exhausted?

Postpaid commitments: bill usage and true up against a floor

A postpaid commitment is a good fit when the customer wants to continue paying for actual usage, while the vendor needs a minimum level of revenue over a defined period, but doesn’t necessarily view the customer as a collections risk. It’s a joint agreement on what to expect.

• The contract specifies an amount of usage or spend that the customer intends to hit over the lifetime of the contract, often a yearly term
• The customer is billed in arrears at the end of each month
• Often times, those monthly invoices include a line item for a “true up” that covers the difference between what was actually used and how the customer is expected to be pacing. It mitigates the risk of receiving a large bill for the bulk of the contract value at the end of the term.
• Sometimes, those true ups can be applied to future invoices as credits

Before implementing a postpaid commitment, answer these questions:

• Which products, prices, or usage types count toward the floor?
• Will you bill true ups to maintain a steady flow of revenue, or only bill for what is used?
• When should true-ups be invoiced, and should they appear on the regular invoice or a separate invoice?
• Does a true-up count as revenue immediately, or does it create a balance for future usage?
• What happens to any remaining balance at the end of the term?

How to implement commitments successfully

Choosing a prepaid or postpaid structure is only the beginning. A commitment changes how Sales, Customer Success, Finance, and the customer operate throughout the contract.

Transparency: Keep progress visible to internal teams and customers to build trust

Everyone should be able to answer the same basic questions: How much has the customer used? How much remains? Are they pacing ahead of or behind the commitment? What happens next if that pace continues?

Internal teams need this information in the billing platform and in the dashboards used for account reviews, renewals, and forecasting. Customers need a clear way to understand their drawdown, remaining balance, eligible usage, and any expected true-up. Ensure that your implementation offers visibility to both parties.

Flexibility: Design invoicing around the contract

The invoice should make the agreement easier to understand, rather than forcing the customer to reconstruct it from a spreadsheet. Before launch, define how usage, funding, true-ups, and rollover will appear.

Some contracts call for a true-up at the end of the term. Others need prorated true-ups during the year. Some teams want the true-up on the regular invoice, while others want it on a separate invoice. Whatever the choice, document the behavior and test the edge cases: a slow first quarter, a late usage spike, a rollover into the next period, and a customer that approaches the commitment faster than expected.

Auditability: Prepare revenue accounting before the first invoice

Prepaid commitments create a timing difference between cash, usage, and revenue recognition. Postpaid commitments create a different set of questions around true-ups, service periods, and what counts toward the commitment.

Finance should be involved before the contract is live. Define how the commitment, funding invoice, drawdown, true-up, credit balance, expiration, and contract changes will flow into the ERP and revenue schedules. Learn more about how Orb is designed for auditable prepaid credits.

Learn more about how Orb makes prepaid credits ERP-ready.

A foundation for the next stage of growth

Moving upmarket does not mean abandoning usage-based pricing. It means giving usage-based pricing the commercial structure that larger customers require.

Commitments help companies bring cash flow closer to the start of a contract, give procurement teams a clearer spend agreement, preserve flexibility through true-ups and rollover, and create a better framework for expansion and renewal conversations.

Orb Commitments is now in early access. Reach out to your account manager to get up and running!