The Microsoft EA true-up — the annual reconciliation explained.

What the true-up actually does — and what it does not.

The Microsoft EA true-up is the formal contract event where the customer reports growth in licence consumption across the prior twelve months. The reporting window opens 60 days before anniversary and closes 30 days after. The customer submits a true-up order quantifying the user, device, processor and core counts that exceeded the original baseline; Microsoft prices the additions at the EA-locked price levels and bills retrospectively from the anniversary date. The new licence count becomes the baseline for the subsequent year.

The critical mechanical point: the EA only permits increases through true-up. There is no contraction mechanism. If you bought 5,000 M365 E3 licences at year zero and the actual headcount falls to 4,200 during the year, the EA still bills 5,000 — and the next renewal starts from 5,000, not 4,200. This is the structural reason why EA right-sizing is concentrated at renewal events rather than mid-term.

What gets trued up — and what doesn't

All licence types added during the year roll into true-up. The most common are M365 subscription seats, Office Pro Plus, Windows Server CALs and core licences, SQL Server core licences, and Visual Studio subscriptions. Azure consumption does NOT roll into true-up — Azure runs on its own monthly/annual billing cycle under the MACC or pay-as-you-go arrangement. Power Platform and Dynamics 365 user subscriptions DO roll into true-up if included in the EA.

The retrospective pricing trap — and the inventive math Microsoft uses.

True-up additions are priced at the EA-locked unit prices established at the original EA signing. The catch is that the licence count uplift is billed retrospectively to the anniversary date even if the licence was added in month eleven of the year. A 1,000-licence addition in month eleven is invoiced at 100% of the annual cost, not 8.3%. Customers consistently misunderstand this and discover the retrospective component only when the true-up invoice arrives.

The remediation pattern is to plan major licence additions either immediately after the anniversary (capturing nearly a full year of use before the next billing window) or to negotiate a quarterly add-on pricing structure where new licences are pro-rated from quarter boundaries rather than billed retrospectively. The latter is achievable in the EA negotiation as a "co-term protection" clause and is frequently not asked for.

Mid-term price exposure

EA pricing is locked at the unit level — but only for products on the EA at signing. New SKUs introduced mid-term (a new Microsoft 365 add-on, a new Copilot variant, a new Power Platform tier) are priced at then-current rates, which may have escalated 8–15% since the original EA was signed. The mid-term-add-on trap is sometimes the most expensive component of a true-up.

Running the true-up cleanly — the 90-day workplan.

A clean true-up starts 90 days before the anniversary and runs through five stages:

1. Inventory snapshot (90 days out). Pull the current user count for each subscription SKU from Microsoft 365 admin centre, on-premises CAL deployment counts, server core deployment counts and developer subscription assignments. Reconcile against the HR active-employee list.
2. Right-size pass (75 days out). Identify shelfware. Disabled accounts retaining E5 licences, contractors who left, dormant test accounts, over-licensed servers, M365 seats assigned to service accounts. Remove or reassign.
3. Add-on review (60 days out). Review every SKU added mid-term. Validate it was needed. Confirm the price applied — escalation, list-price drift, then-current pricing for new SKUs.
4. True-up filing (30–45 days out). Submit the reconciliation reflecting the right-sized counts. Include negotiated price protections.
5. Post-anniversary audit (30 days after). Verify the invoice matches the filing. Microsoft errors at this stage are common.

For EAs above $1M annually, independent Microsoft EA optimization across the true-up cycle typically captures cost reduction equal to four to ten times the advisory fee.