True-up

A true-up settles the difference between the estimate and the reality. Three situations produce one:

1. Commitment shortfall. A customer committed to $120,000 and consumed $95,000. The $25,000 shortfall is trued up at the end of the term.
2. Seat reconciliation. A contract licenses 500 users but the customer has been running 620. The extra 120 are trued up, often annually.
3. Late usage data. Consumption events arriving after the invoice run are settled in the following period.

Annual true-ups are an enterprise convention

In large enterprise agreements, seat true-ups are frequently the intended mechanism rather than an exception: the customer deploys freely through the year and reconciles once, which removes procurement friction from every incremental user.

That is commercially sensible and operationally demanding. It requires the vendor to track entitlement against actual usage continuously, and to be able to evidence the gap when the true-up invoice is questioned — which it will be, because it arrives as a single large unexpected line.

Prefer visibility to surprise

The failure mode of true-ups is the customer who discovers a $180,000 reconciliation charge they had not budgeted for. The relationship damage usually exceeds the revenue.

Mid-term visibility fixes most of this: showing the running gap between entitled and actual usage in the customer’s own portal turns an annual shock into a running conversation, and frequently converts into an expansion quote before the true-up is ever needed.