Trueups

Trueup refers to an adjustment made to reconcile differences between estimated, forecasted, or previously billed amounts and the actual results. It is a common mechanism in accounting, budgeting, rate-setting, and billing to ensure that charges or financial statements reflect reality after the fact.

In finance and accounting, true-ups settle variances between planned budgets and actual performance, such as year-end adjustments, tax provisions, or intercompany charges. In energy and utilities, true-up often describes the periodic reconciliation of predicted energy usage, demand, and pricing with what customers actually consumed or paid; the outcome can increase or decrease a bill. In cloud computing and IT services, true-ups adjust usage-based charges that were estimated in a contract to match actual usage, sometimes generating a supplementary invoice or credit. In payroll and benefits, true-ups may adjust contributions or withholding when employee status or benefits eligibility changes during a period.

The typical process involves identifying the variance, calculating the adjustment according to the agreed formula or contract, recording and communicating the adjustment, and settling the difference within a specified true-up period. Considerations include data accuracy, timing, regulatory or contractual requirements, and the impact on cash flow and budgeting.

Related concepts include reconciliation, variance analysis, and accruals. True-ups help align books and bills with real-world activity, reducing systemic discrepancies over time.