The annual true up is a routine line in your Enterprise Agreement that quietly sets your exposure for the year. Treating it as paperwork is how organizations overpay and how they walk into an audit.
A demand, not an audit
Under an Enterprise Agreement, you commit to a baseline of products and then report growth once a year through a true up. It is a contractual obligation, not an audit, and that distinction matters. An audit is run against you by a third party. A true up is run by you, on yourself, and reported to Microsoft. The softer framing leads many organizations to treat it as administrative. It is not. The number you submit becomes your licensed position for the year and the baseline everything else is measured against.
What the true up actually requires
The true up asks you to count the additional usage you have added since your last report, across the products in your agreement, and to acquire licenses to cover it. For user and device based products that means counting people and machines. For server products it means counting cores, instances, and access. The demand is for an accurate increase, and accuracy cuts both ways. Overcount and you pay for licenses you do not use. Undercount and you create a shortfall that an audit can later find and penalize.
Where organizations overpay
Most true up overpayment comes from counting convenience rather than counting reality. Common patterns include:
- Counting every account in a directory rather than active, licensed users
- Carrying forward leavers and dormant accounts that should have been removed
- Acquiring the higher edition by default when a lower one covers the use
- Double counting users who are already covered by an existing entitlement
- Treating optional add ons as required across the whole population
Where organizations underpay and create risk
The opposite error is quieter and more dangerous. Usage that grew during the year but was never captured becomes an unreported shortfall. Microsoft draws its own data from Azure, Microsoft 365, and management tooling, and an undercount that the true up missed can surface later as unlicensed use. If that use reaches 5 percent or more of total use in a subsequent audit, the clause requires reimbursement of verification costs and acquisition at 125 percent of price. A true up that understates growth is not a saving. It is deferred exposure with a premium attached.
How to right size before you submit
A defensible true up starts from your own reconciliation, not from the figure Microsoft expects. Build the real count, reconcile it against entitlement, strip out the overcounts, capture the genuine growth, and submit a number you can stand behind. The goal is accuracy in both directions: pay for what you use, and document why that is the right figure.
Two failure modes, one fix
| Failure | Consequence | Fix |
|---|---|---|
| Overcount | Pay for unused licenses all year | Reconcile to active, entitled use |
| Undercount | Shortfall surfaces in an audit at a premium | Capture real growth from your own data |
The next step
The annual true up is where the audit relationship is shaped quietly, every year. For the full picture, see our pillar, the Microsoft Audit Survival Guide for 2026, then read how an audit differs from a true up and the true up data Microsoft relies on. Submit your own number, built from your own reconciliation, and the true up becomes a control rather than a risk.
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