A true-up is a periodic reconciliation built into a contract, in which the customer’s actual usage or license count is compared with what has been paid for, and the difference is billed, or in some contracts credited. True-ups are common in enterprise software agreements, per-user subscriptions such as unified communications, and committed-spend cloud deals. They let a business add users or usage during the term without reordering each time, then settle up on a set date.
At a glance
- A true-up reconciles actual use with what was paid for on a schedule the contract sets, often annually.
- It usually bills for growth; whether counts can go down depends on the contract.
- Pricing may be for the full period or prorated from when use began, depending on the terms.
- It uses customer-reported or provider-metered quantities on agreed terms; a vendor license audit is a separate compliance check.
- Tracking usage through the year is how buyers avoid a surprise bill.
What problem it solves
Organizations change size during a contract. They hire, open sites, add projects and spin up new workloads. Ordering every added license as it is needed would mean constant paperwork and many small renewal dates. A true-up lets the business deploy what it needs and settle the difference periodically, at contracted prices.
For the vendor, the true-up is how it gets paid for growth. For the buyer, the risk is that growth goes unmeasured until the bill arrives. Licenses assigned to people who have left, test environments nobody switched off, or usage above a cloud commitment can all show up at once. Understanding how your true-up is counted and priced lets you budget for it and challenge it where the numbers are wrong.
How it works
The baseline. The contract sets a starting quantity, such as a number of users or a committed spend, paid at the start of the term or periodically.
Use during the period. The customer adds users or usage as needed. Depending on the product, the vendor may see usage directly, as with many SaaS and cloud services, or rely on the customer to report it, as with some installed software.
The reconciliation. On the true-up date, the highest or current count, depending on the contract’s method, is compared with the baseline. Excess use is typically billed at the agreed rate, either for the whole period or prorated from when it began. For per-user licensing, a peak-count method can bill for people who were licensed only briefly.
Reductions. Some contracts let counts fall at the true-up or anniversary; others allow reductions only at renewal. Where there is a minimum annual commitment or a cloud commitment agreement, the true-up may also settle any shortfall against the commitment.
Alignment. True-ups can create new license lines with their own dates; co-terming keeps them on the main renewal date.
Records. Software asset management (SAM) gives the customer its own count to check against the vendor’s figure. Our software asset management page covers tools and services that track this through the year.
When it matters for buyers
- Before signing. Negotiate the counting method, proration, reduction rights and the true-up date.
- During growth. Hiring sprees, acquisitions and new projects raise the next true-up bill; budget for it.
- After downsizing. If counts can only fall at renewal, you may pay for unused licenses until then.
- Ahead of the true-up date. Remove departed users and unused instances before the count is taken.
- With cloud commitments. Overage and shortfall terms decide whether usage above or below commitment costs extra.
Questions to ask vendors
- When is the true-up, and how is usage counted: peak, average or a point-in-time count?
- Is added use priced for the full period or prorated from when it began?
- Can we reduce counts at the true-up or anniversary, or only at renewal?
- What price applies to added licenses, and is it fixed for the term?
- What reports will we see before the true-up so we can check the figures?
- How do true-up additions align with our renewal date?
- Does a regular true-up limit your right to audit us, or do both apply?
How it differs from a software license audit
A true-up is a planned part of the commercial relationship: on a set date, the customer and vendor reconcile use on terms agreed in advance. A software license audit is a separate compliance-verification process the vendor may start under the audit clause, often across a longer period and with less favorable pricing for any shortfall. A well-run true-up process tends to reduce audit exposure, but the two usually coexist in the same agreement.