> ## Documentation Index
> Fetch the complete documentation index at: https://docs.getlago.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Minimum commitments

> How Lago recognizes minimum commitment and true-up fees.

A minimum commitment guarantees you'll bill a customer at least a set amount for a period, even if their usage comes in below it. The shortfall is charged as a **true-up fee** at the end of the period.

Lago recognizes the commitment in two parts:

1. The customer's **actual usage** is recognized as it's consumed, exactly like any [usage-based charge](/guide/revenue-recognition/how-it-works/usage-based-charges).
2. The **true-up** (the gap between the commitment and actual usage) is recognized in full **when the true-up fee is created**, at the end of the period.

> **True-up recognized = commitment amount − actual usage in the period** (never less than zero).

## Usage below the commitment

A customer commits to \$500 for January but only consumes \$300 of usage. The \$200 shortfall is trued up at month end.

| Date               | Event               | Amount       | Recognized revenue | Explanation                                                                         |
| ------------------ | ------------------- | ------------ | ------------------ | ----------------------------------------------------------------------------------- |
| Throughout January | Usage consumed      | \$300.00     | \$300.00           | Recognized day by day as usage happens.                                             |
| Jan 31             | True-up fee created | \$200.00     | \$200.00           | The commitment shortfall, recognized in full on the day the true-up fee is created. |
|                    | **January total**   | **\$500.00** | **\$500.00**       | The customer earns you the full committed amount.                                   |

The true-up isn't spread across the month. It's recognized at the point the fee is created, because that's when the shortfall is known and the obligation is settled.

## Usage above the commitment

Same \$500 commitment, but the customer consumes \$600 of usage. There's no shortfall, so there's no true-up.

| Date               | Event             | Amount       | Recognized revenue | Explanation                                               |
| ------------------ | ----------------- | ------------ | ------------------ | --------------------------------------------------------- |
| Throughout January | Usage consumed    | \$600.00     | \$600.00           | Recognized as consumed.                                   |
| Jan 31             | True-up check     | \$0.00       | \$0.00             | Usage already exceeds the commitment. Nothing to true up. |
|                    | **January total** | **\$600.00** | **\$600.00**       | The customer earns you more than the minimum.             |

## What this means for your reports

* During the period, the [Recognized Revenue report](/guide/revenue-recognition/reports/recognized-revenue) shows usage building up day by day.
* At period end, a true-up (if any) appears as a single point-in-time entry on the last day.
* The true-up is real recognized revenue for the period it closes, not deferred revenue.