Software true-up vs true-down: what your agreement allows

A software true-up is the clause that lets the vendor bill you, usually once a year, for every seat or device you used above what the contract covers. A true-down would let you lower the count and the bill the same way. Almost no standard agreement offers the second: the count can go up during the term and only comes down at renewal, if the notice period was respected. Knowing which of the two your contract contains decides whether cleaning up unused seats saves money this year or next.

What is a software true-up?

Enterprise agreements and many SaaS contracts let you add users during the year without a purchase order. The true-up is the moment the vendor counts what you actually used and invoices the difference at the contract price. Microsoft Enterprise Agreements do it annually; most SaaS vendors do it monthly or at renewal, some continuously through overage billing.

Two details in the clause matter more than the mechanism. First, the count: named users, active users, devices, or installed copies, each of which produces a different number for the same team. Second, the price: some contracts apply the negotiated unit price to the extra seats, others apply list price, which can be double.

What is a true-down, and why is it so rare?

A true-down is the mirror clause: at a defined moment, you report a lower count and the invoice follows. Vendors resist it because their revenue model assumes seats only grow during a term. Where it exists, it comes with limits: once a year, at the anniversary, not below a floor (often 80 or 90 percent of the initial commitment), and sometimes only for seats that were unused for a full quarter.

Without a true-down clause, the only way down is renewal. That is why the notice period and the renewal date are the two dates to track on every contract, not the true-up date.

How do the two clauses compare in practice?

How do you check a true-up invoice?

The vendor's number is a claim, not a fact. Before paying, compare it with your own records: who is assigned to the product, since when, and whether the assignment still matches an active employee. In the InventorIA demo workspace, the Zoom contract shows 80 seats bought and 49 assigned across the people list; a true-up invoice above 80 would be wrong on its face, and 31 seats are a true-down argument for the next renewal.

• Reconcile the basis: named versus active users. Vendors count named accounts, including offboarded staff whose accounts were never disabled.
• Check the period: a true-up covers the term, not a peak day. A temporary project team that left in March should not be billed in December.
• Check the price: contract unit price, not list.
• Keep the evidence: the assignment history with dates is what wins a dispute, and what an auditor asks for.

What should you negotiate before signing or renewing?

1. A true-down window at each anniversary, with a floor you can live with (80 percent is common when asked for).
2. True-up at the contract price, never list, and a cap on the yearly increase.
3. A reconciliation right: 30 days to contest the vendor's usage report with your own records before the invoice is due.
4. The counting rule in writing: active users over the last 90 days, not named accounts.
5. Renewal at the reconciled count, not at the peak.

Each point is easier to obtain at renewal than mid-term, which is one more reason the renewal calendar starts 90 days before the notice deadline.

Where do the records for this live?

The whole exercise rests on one thing: an assignment record per seat, with a start date, an end date, and the person it belongs to. A spreadsheet holds it for a while; it stops being trustworthy when offboarding happens in HR and nobody updates the sheet. A register that links people, licenses and contracts keeps the count current and gives you the number to put against the vendor's. Open the live demo to see the seat count next to each contract, or start with your own licenses. Vendor policies to read alongside your contract: Microsoft's licensing documents describe the annual true-up of the Enterprise Agreement.

Frequently asked questions

What is a true-up in software licensing?

An invoice for the seats, devices or installs you used above the contracted count, at the price set in the agreement, usually once a year or at renewal.

Can I reduce my license count mid-term?

Only if the contract has a true-down clause. Otherwise the count comes down at renewal, and only if you send the notice in time.

Is a true-up billed at list price?

It depends on the clause. Many agreements apply the negotiated unit price, some apply list price. Read the clause and negotiate the contract price before signing.

How do I dispute a true-up invoice?

With your own assignment records: who held a seat, from when to when. Compare the counting basis (named versus active users) and the period, then use the reconciliation right if the contract has one.