1. Overview of Billing Methods

Explanation
This section defines the core concepts used throughout the guide. It introduces collection timing (when fees are assessed) and valuation types (how the billable balance is measured), using the same symbols and language as the methods that follow.

1.1 Collection Types

• Advance
  Under Advance billing, fees are assessed in advance for the upcoming billing period, using account values determined during the preceding valuation period.

• Advance with Proration
  Advance with Proration works the same as standard Advance billing, except that if an account is opened—or its BridgeFT data connection is established—during the valuation period, the billing period is extended to include the prorated days from that valuation period when the account became active.

• Arrears
  In Arrears billing, the valuation period itself serves as the billing period, with fees calculated after that period has ended.

1.2 Valuation Types

• Ending Period Balance (EPB)
  The account’s value on the last day of the valuation period.

• Ending Period Balance Adjusted for Flows (EPB+F)
  Starts from Ending Period Balance and adjusts for flows that were not present for the entire valuation period, so the billable balance reflects managed assets over time.

• Ending Period Balance Adjusted for Flows Less Cash (EPB+F−Cash)
  Starts with EPB+F (flows—including cash—are time-weighted in the adjustment), then subtracts the ending-period cash balance

• Average Daily Balance (ADB)
  The average of daily balances across the valuation billing period—captures day-to-day changes rather than a single-day snapshot.

1.3 Billable Balance

The Billable Balance (B) is the balance we use to calculate fees, computed using the selected method (e.g., EPB, EPB+F, EPB+F−Cash, ADB) over the account’s defined valuation period.

How Billable Balance is used to Calculate Fees

The Annual Fee is the result of applying the applicable pricing schedule (flat, tiered, etc.) to the Billable Balance. The Period Fee reflects the Annual Fee proportional to the desired billing cadence (e.g., monthly, quarterly, or daily).

Fee Calculation Example

1) Compute B  = billable balance (e.g., EPB, EPB+F, EPB+F−Cash, ADB).

2) Annual Fee = apply your pricing rules to B. (e.g., flat, tiered, etc)

	> Annual Fee (Flat 1% Rate): B * 0.01

3) Period Fee = Annual Fee × partition (e.g., monthly, quarterly, or daily).

	> Period Fee (Quarterly): (B * 0.01)*.25

Additional Note: If there are any asset adjustments assigned to accounts they may also impact the Billable Balance value.

2. Symbols

Before diving into formulas, it helps to know the symbols used in this guide. These are the exact terms our billing engine uses.

3. Formulas and Examples by Combo

This section clarifies how the billing engine calculates fees using each supported method. For every method, you’ll see the exact formula the engine uses, an explanation, and a brief “Context and Purpose” to describe what the method represents—without recommending how to bill. All symbols and formulas match the engine’s implementation.

Note on Flow Adjustment

In some cases, we adjust E so the billable balance reflects only the time assets were actually under management. We refer to this as the flow adjustment, and it’s used only in valuation types that apply adjustment for flows.

Flow Adjustment = Σ (F_i × (1 − p_i))

3.1 Advance + Ending Period Balance (EPB)

Formula
Billable Balance = E

Explanation
Bills at the start of a new (billing) period using the prior (valuation) period’s ending balance (E).

Context and Purpose
Describes a billing approach that bases the fee on a finalized prior-period balance, producing a fixed amount unaffected by current-period activity.

Example:

E = $250,000
Billable Balance = $250,000

3.2 Advance + Ending Period Balance Adjusted for Flows (EPB+F)

Formula
Billable Balance = E − Σ (F_i × (1 − p_i))

Explanation
This method begins with the ending period balance (E) and then adjusts for deposits or withdrawals that were not present for the full valuation period. Each flow (F_i) is multiplied by the fraction of the valuation period it was not in the account (1 − p_i). The result removes the effect of partial-period flows so that the bill reflects only the assets that were actually managed.

Context and Purpose
This approach provides a more precise picture of managed assets for accounts with mid-period activity. It balances simplicity with fairness by considering the time each inflow or outflow was in the account, without requiring daily tracking.

Example:

E = $200,000
D = 90 days

Inflow: $50,000 on day 30 → p = 0.6667
Outflow: $20,000 on day 60 → p = 0.3333

> Step 1 — EPB+F adjustment
Adjustment = (50,000 × (1 − 0.6667)) + (−20,000 × (1 − 0.3333)) = (50,000 × 0.3333) + (−20,000 × 0.6667) = 16,665 − 13,334 = 3,331

> Step 2 — Apply adjustment to E
Billable Balance = 200,000 − 3,331 = 196,669

3.3 Advance + Ending Period Balance Adjusted for Flows Less Cash (EPB+F−Cash)

Formula
Billable Balance = (E − Σ (F_i × (1 − p_i))) − C_end

Explanation
Starts with the EPB+F result, then subtracts the ending-period cash balance so only invested assets remain in the billable balance.

Context and Purpose
Useful when cash should not be billed while still reflecting the time-weighted impact of all flows. Keeps reconciliation simple: flow timing is handled once (EPB+F), and cash is removed via the valuation period-end cash total.

Example:

E = $200,000D = 90 days
Flows: • Inflow: $50,000 on day 30 → p = 0.6667 • Outflow: $20,000 (cash) on day 60 → p = 0.3333Ending-period cash balance (C_end) = $10,000 # assumed for illustration
> Step 1 — EPB+F adjustment
Adjustment = (50,000 × (1 − 0.6667)) + (−20,000 × (1 − 0.3333))
= (50,000 × 0.3333) + (−20,000 × 0.6667)
= 16,665 − 13,334
= 3,331

> Step 2 — Apply adjustment to E
EPB+F base = 200,000 − 3,331 = 196,669

> Step 3 — Subtract ending-period cash balance
Billable Balance (EPB+F−Cash) = 196,669 − 10,000 = 186,669

3.4 Advance + Average Daily Balance (ADB)

Formula
Billable Balance = Average daily balance over the period

Explanation
This method calculates the average balance of the account across every day in the valuation period.
Instead of focusing on one specific date, it takes each day’s balance, adds them up, and divides by the total number of days. This creates a smooth, time-weighted measure of how much was managed throughout the valuation period.

Context and Purpose
This approach is useful for accounts whose balances fluctuate frequently, such as those with ongoing deposits, withdrawals, or market movements. By using the average rather than a single day’s snapshot, it provides a fair reflection of actual exposure over time and helps even out short-term volatility.

Example:

Days 1–30 balance = $100,000
Days 31–90 balance = $150,000

Calculation:
 - (100,000 × 30) + (150,000 × 60) = 12,000,000
 - ADB = 12,000,000 / 90 = 133,333
Billable Balance = 133,333

3.5. Advanced Collection w/ Proration

Explanation
Advanced Collection with Proration (sometimes called AdvancedArrears) handles the first time an account is billed on an advance schedule. It pairs:

1. the upcoming full period billed in advance, and
2. a one-time catch-up billed in arrears for the prior partial period when the account was present but had not yet been billed.

Context and Purpose
When advance billing is run for a new account, a portion of the preceding period may contain managed assets that were not included in the last billing cycle (because the account wasn’t open yet when that prior cycle was invoiced). This concept avoids leaving that initial partial window unbilled, while keeping the normal advance process for the period ahead.

Key Notes

• This concept does not change how the Billable Balance is determined (e.g., EPB, EPB+F, EPB+F−Cash, ADB).
• It only changes how the Annual Fee is partitioned into the current Period Fee on the first bill for a new account.

Advanced Collection w/ Proration - Worked Example

Scenario

• Suppose a new account incepts on 4/8 (inside Q2).
• On 6/30, when billing Q3 in advance, a standard advance-only approach would cover 7/1–9/30, but the 4/8–6/30 window in Q2 would never be billed.
• Advance with Proration (or AdvancedArrears) combines the Q3 in-advance portion with a one-time arrears catch-up for 4/8–6/30, in this case the full billing period would be 4/8 - 9/30.

Formula Panel

Billable Balance (E) = (determined by any method above: EPB, EPB+F, EPB+F−Cash, ADB, etc.)

Annual Fee = Billable Balance × fee structure (Fee structure can be flat or tiered, possibly with minimums/caps)
Period Fee = Annual Fee × (whole partition factor + partial partition factor)

• Whole partition factor = fraction of the upcoming period billed in advance
• Partial partition factor = fraction of the prior partial period billed in arrears (one-time)

Calculation: Billing Q3 in advance on 6/30 using Average Daily Balance

>Balances:
Days 1–7 (4/1–4/7): $0
Days 8–92 (4/8–6/30): $100,000

>ADB: Average Daily Balance
ADB = E = (0 × 7) + (100,000 × 84) / 92 = 91,304.35

>Rate (simple): 1%

>Annual Fee
Annual Fee = 91,304.35 × 0.01 = $913.04

>Partition Factors
Whole Partition Factor (7/1–9/30) = 0.25
Partial Partition Factor (4/8–6/30) = 84 / 365 = 0.23

>Period Fee
Period Fee = 913.04 × (0.25 + 0.23) = $438.26

After this first bill, future advance cycles do not include a partial (arrears) component; behavior aligns with regular advance collection.

3.6 Arrears + Ending Period Balance (EPB)

Formula
Billable Balance = E

Explanation
This method calculates fees after the billing period ends, using the account’s ending balance (E) as of the closing date. Since the period is complete, E reflects all activity that actually existed at period end. No additional flow timing logic is applied.

Context and Purpose
It offers a simple, statement-aligned bill based on the final balance snapshot.

Example:

E = $250,000
Billable Balance = $250,000

3.7 Arrears + Ending Period Balance Adjusted for Flows (EPB+F)

Formula
Billable Balance = E − Σ (F_i × (1 − p_i))

Explanation
Fees are calculated after the billing period ends, starting from the ending balance (E) and adjusting for deposits or withdrawals that were not present the entire period. Each flow (F_i) is scaled by the fraction of the period it was not in the account (1 − p_i), so the billable balance reflects only the assets actually managed.

Context and Purpose
Useful when you want post-period billing that still accounts for mid-period activity. In other words, It preserves statement alignment at period end while improving accuracy for accounts with meaningful inflows or outflows during the cycle.

Example:

E = $200,000

Inflow: $50,000 on day 30 → p = 0.6667
Outflow: $20,000 on day 60 → p = 0.3333

> Step 1 — EPB+F adjustment
Adjustment = (50,000 × 0.3333) + (−20,000 × 0.6667) = 16,665 − 13,334 = 3,331

> Step 2 — Apply adjustment to E
Billable Balance = 200,000 − 3,331 = 196,669

3.8 Arrears + Ending Period Balance Adjusted for Flows Less Cash (EPB+F−Cash)

Formula
Billable Balance = (E − Σ (F_i × (1 − p_i))) − C_end

Explanation
Calculates fees after the billing period ends. Starts with EPB+F, then subtracts the ending-period cash balance (C_end) to exclude cash from the billable balance while preserving the impact of flow timing.

Context and Purpose
A post-period approach that reflects actual assets under management and removes cash from billing using a single, reconciliable period-end cash figure.

Example:

E = $200,000
D = 90 days

Flows:
• Inflow: $50,000 on day 30 → p = 0.6667 ⇒ (1 − p) = 0.3333
• Outflow: $20,000 (cash) on day 60 → p = 0.3333 ⇒ (1 − p) = 0.6667
Assume ending-period cash balance (C_end) = $10,000

> Step 1 — EPB+F adjustment
Adjustment = (50,000 × 0.3333) + (−20,000 × 0.6667)
= 16,665 − 13,334
= 3,331

> Step 2 — Apply adjustment to E
EPB+F base = 200,000 − 3,331 = 196,669

> Step 3 — Subtract ending-period cash balance
Billable Balance (EPB+F−Cash) = 196,669 − 10,000 = 186,669

3.9 Arrears + Average Daily Balance (ADB)

Formula
Billable Balance = Average daily balance over the period

Explanation
Fees are calculated after the billing period ends using the account’s average daily balance (ADB) across all days in the period. Rather than a single-day snapshot, this method reflects the time-weighted exposure of assets throughout the entire cycle.

Context and Purpose
Well-suited for accounts with frequent balance changes where a day-by-day view offers a fairer picture than an end-date balance alone. It aligns post-period billing with actual daily asset levels, smoothing short-term spikes and dips.

Example:

ADB = $133,333 (from 3.4)
Billable = $133,333

Appendix:

4. Calculation ADB — Calendar vs. Market Days

Explanation
This appendix entry explains why Average Daily Balance (ADB) is computed over calendar days rather than market/trading days, and how to handle days when source data isn’t updated.

The Industry Standard
Using calendar days aligns fee calculations with how balances and valuations actually exist and are reported across the industry. The notes below summarize industry standard handling rules for non-market days for AUM-based billing.

4.1 Why calendar days?

• Assets exist every day, even when markets are closed.

• Cash accrues interest continuously, not only on trading days.

• Many products (e.g., mutual funds, SMAs) provide daily valuations.

• Custodians (e.g., Schwab, Fidelity, Pershing) generally report end-of-day balances on calendar days.

• Industry guidance (e.g., GIPS) assumes calendar-day weighting unless otherwise specified.

  “Daily-weighted methods should use calendar days unless otherwise specified.” — CFA Institute GIPS Handbook

4.2 Practical Handling when Data Updates only on Market Days

Since our source data is only updated on market days, we:

1. Carry forward the last known balance across non-market days.
2. Compute ADB by dividing the sum of daily balances by the total number of calendar days in the billing period.