Rebate true-up

Also: accrual true-up · settlement adjustment · estimate-to-actual adjustment

A rebate true-up is the adjustment recorded at settlement that reconciles the accruals booked during the period to the amount actually earned. Twelve monthly accruals are estimates made with incomplete information; the annual settlement is computed on actuals; the difference between their sum and the settlement is the true-up.

A small, explainable true-up is the signature of a controlled program. A large or unexplainable one is what auditors — and the customer’s own rebate team — dig into first. (Related reading: the rebate leaks you won’t see until year-end.)

Where true-ups come from

The rate estimate. Tiered programs accrue at the rate the customer is expected to finish at. If the finishing tier was called wrong — especially with retroactive tiers, where the miss applies to every dollar — the true-up absorbs the difference.
Late data. Returns, credit notes, and late shipments land after the period they economically belong to, shrinking or growing the qualifying base after it was measured.
Base drift. If “qualifying turnover” was computed slightly differently in different months — freight in, freight out; returns netted, returns missed — twelve inconsistent bases add up to a difference nobody can attribute.

The control question: does your true-up decompose?

The test of a rebate control environment is not whether the true-up is zero — it never is — but whether it decomposes into named causes: this much from the rate estimate, this much from late returns, this much from base drift. A true-up booked as one plug number means the underlying calculation can’t explain itself; a true-up that decomposes means accruals, corrections, and settlement all live on one ledger that can be queried. How that decomposition works in an append-only calculation model is described on the rebate accrual software page and, for annual programs specifically, the turnover rebates page.