Educational information only. This is not legal, tax, accounting, or financial advice. Subject to applicable law and the agreement’s terms, a reconciliation clause may support a request for a lower future remittance when the signed agreement ties collections to defined receipts and provides a true-up or reconciliation process. A sales decline, by itself, may not change a fixed ACH debit.
Table of ContentsJump to a section
- Revenue-Based Financing Reconciliation in Practice
- Identify Your Collection Structure First
- Read the Signed Agreement, Not the Sales Pitch
- Reconciliation Is Different From Other Forms of Relief
- Build a Reconciliation File That Can Be Reviewed
- Send a Focused Written Request
- Two Common Outcomes
- Check the Provider's Response Before Treating It as Final
- A Lower Debit May Still Leave a Cash Problem
- Disclosure Rules Provide Context, Not a Universal Remedy
- When to Get Contract-Specific Help Quickly
- Frequently Asked Questions
- Sources
Before spending time on a request, pull the executed agreement, amendments, payment history, and sales-source reports. The details that matter are usually in the clause: what counts as receipts, the period that can be reviewed, required documents, where notice must be sent, and whether a default affects the process.
This page updates the existing reconciliation guide at Mulah’s revenue-based financing reconciliation provision explainer. Its focus here is practical: determine whether a true-up is available, make a clean request, and understand what an approval or denial actually means.
Revenue-Based Financing Reconciliation in Practice
Revenue-based financing and merchant cash advance agreements do not all collect the same way. The CFPB notes that an MCA may be collected through a percentage holdback from future revenue or through fixed daily ACH withdrawals. Those two arrangements can produce very different results when receipts drop. CFPB Small Business Lending Rule FAQs
With a true-up, the provider may compare what it collected during a defined period against the contract’s percentage of covered receipts. The clause may call for a lower future debit, a credit, a refund, an adjustment in the other direction, or no change. Your own math is useful evidence, but it isn’t a contractual remedy until the agreement and provider review support it.
Keep making decisions based on the agreement currently in force. A reconciliation request is not, by itself, a payment holiday, and it does not itself authorize a business to stop or alter ACH withdrawals.
Identify Your Collection Structure First
| Collection structure | What happens when receipts fall | What to inspect | Is reconciliation relevant? | Key caution |
|---|---|---|---|---|
| Processor percentage holdback | The amount withheld may decline along with covered receipts. | Agreement, processor terms, holdback percentage, receipts definition, processor reports. | Sometimes, though collections may already vary. | A lower processor payout does not establish that every contractual receipt source has changed. |
| Fixed ACH estimate with a true-up | The debit may remain fixed until reconciliation produces a documented change. | True-up clause, specified percentage, review period, notices provision, ACH ledger. | Often, if the clause’s conditions are met. | A fixed ACH debit may not reset automatically when sales fall. |
| Fixed or minimum-payment structure | The scheduled debit may remain due despite weaker sales. | Payment schedule, minimum-payment terms, amendments, default provisions. | Possibly not. A modification request may fit better. | Lower sales alone may not create an adjustment right. |
Federal regulatory materials describe true-ups as a way fixed sales-based payments may be adjusted to better reflect a stated percentage of sales or revenue. That description provides context. It does not require every provider to offer or approve reconciliation. CFPB Section 1071 final rule discussion
Read the Signed Agreement, Not the Sales Pitch
A broker’s explanation, a marketing page, or a disclosure summary may help you spot an issue, but the executed agreement and amendments generally govern the contractual request process, subject to applicable law, enforceable modifications, and other legal rights. Compare those documents with the ACH debits that actually cleared your account.
Read the reconciliation provision as a whole. Look for the defined terms around reconciliation, true-up, specified percentage, remittance, receipts, sales, income, revenue, and purchased amount. Then answer these questions:
- Does the clause say the provider shall or must reconcile when conditions are met, or does it say the provider may do so?
- What exactly is the receipts base: gross sales, collected receipts, card receipts, deposits, or another defined measure?
- Which period can be reviewed, and is there a threshold or deadline?
- What notice address, delivery method, certification, and records are required?
- Does a claimed default limit the process, and can the clause adjust collections upward as well as downward?
- What remedy does the clause actually name: a future debit change, credit, refund, or something else?
Reconciliation Is Different From Other Forms of Relief
| Process | Purpose | What may change | What does not change automatically | What is needed |
|---|---|---|---|---|
| Contractual true-up | Compare collections with the agreement’s receipts-based mechanics. | A future estimated debit, credit, refund, or stated remedy. | Total purchased amount and other obligations. | The applicable clause and required provider review. |
| Hardship accommodation | Seek temporary relief because cash is tight. | Only terms the provider agrees to change. | Existing contract rights and remedies. | Written provider approval. |
| Modification or restructuring | Address a longer-term payment mismatch. | Schedule, timing, payment amount, fees, or other negotiated terms. | The original agreement unless new documents say otherwise. | A written modification or restructuring agreement. |
| Deferral | Move a collection date. | Timing, if agreed. | Amount due, added costs, or default effects. | Written agreement. |
| Settlement | Resolve an obligation or dispute on negotiated terms. | Terms expressly included in the settlement. | Collection activity or releases before documents are complete. | Written settlement and careful review. |
| Payoff or refinance | End or replace the existing arrangement. | Existing balance after payoff and terms of any replacement financing. | ACH authority or security interests before payoff is confirmed. | Dated payoff quote and applicable new documents. |
| Chargeback or refund dispute | Resolve a customer or processor transaction issue. | Processor settlement or customer transaction status. | The agreement’s defined receipts base. | Processor records and the relevant dispute process. |
If the contract has no usable true-up mechanism, or if a minimum-payment provision controls, it may be more productive to assess MCA restructuring or other ways to lower MCA payment pressure. Those are separate discussions, not alternate names for reconciliation.
Build a Reconciliation File That Can Be Reviewed
The strongest request is easy to follow. It tracks the agreement’s own definitions and shows where every number came from. Keep originals in your files and submit copies unless the agreement says otherwise.
| Document | Why it matters | Source system | Verified |
|---|---|---|---|
| Executed agreement and amendments | Shows the controlling terms and clause citation. | Contract file | ___ |
| ACH or payment ledger | Identifies collections during the review period. | Bank, accounting system, or provider portal | ___ |
| Bank statements | Supports the deposit tie-out and ACH identification. | Bank | ___ |
| Processor, POS, marketplace, platform, or invoice reports | Supports the applicable receipts base. | Processor, POS, marketplace, or AR system | ___ |
| Refund, chargeback, reserve, and delayed-payout support | Explains timing differences in the records. | Processor or platform records | ___ |
| Calculation workbook and attachment index | Makes the inputs and supporting records traceable. | Internal file | ___ |
| Dated notice and delivery proof | Documents compliance with the notices provision. | Email, mail, courier, or portal | ___ |
| Provider communications | Preserves requests, questions, and decisions. | Correspondence file | ___ |
Prepare a Planning Comparison
Start with the contractual receipts definition, not a generic sales figure. A card-based business, for example, might show gross card sales, processor fees, refunds, chargebacks, reserves, delayed settlements, and cleared bank deposits. Those figures are related, but they are not interchangeable. The agreement determines which one is relevant.
A basic tie-out can separate the issues:
- Pull the source report for the relevant sales or collection channel.
- List fees, refunds, chargebacks, reserve movements, and delayed payouts separately.
- Match settlements to deposits that cleared the operating account.
- Mark each provider ACH debit that cleared during the review period.
Your workbook can then show contract-defined receipts, the stated percentage, the resulting planning amount, ACH collections identified, and the difference. Label it “planning comparison, subject to contract review.” It supports a clear request without claiming a credit, refund, or payment amount that the clause does not establish.
For a fuller explanation of the differences between sales reports and deposits, see gross sales versus net deposits. Chargebacks, refunds, and payout delays can also affect cash planning, even where they do not change the contractual receipts definition.
Send a Focused Written Request
Use the agreement’s notices channel. Copying a broker or salesperson can be useful, but it may not satisfy the formal notice requirement. Save the sent message, delivery confirmation, attachment index, and any portal receipt.
Keep the request factual. Ask for a written decision, the basis for any different calculation, and the effective date of any adjustment. If the agreement requires a certification, certify only what your records support.
The FTC has identified concerns that promised MCA reconciliations may not occur after sales decline. That is a reason to preserve a careful paper trail, not evidence that a particular provider will mishandle a request. FTC staff perspective on small-business financing
Sample Reconciliation Request Notice
Subject: Reconciliation request under [agreement date], [clause and page]
[Provider notices recipient]:
[Business legal name] requests a review under the reconciliation provision identified above for [review dates]. The agreement defines [receipts/sales/income] as [brief contractual description].
Attached are [list agreement and amendments, source reports, bank statements, ACH ledger, support for refunds/chargebacks/reserves or delayed payouts if applicable, and planning workbook]. For planning purposes only, the workbook applies the stated [percentage] to the contract-defined receipts identified for the period and compares that amount with ACH collections in the attached ledger.
Please review the materials under the agreement and provide a written decision. If an adjustment, credit, refund, or revised estimated remittance applies, please state the calculation basis, amount, and effective date. Please identify any additional documents required under the agreement.
This request does not instruct the provider to stop or alter authorized collections.
Sincerely,[Name, title, business, address, phone, email]
Two Common Outcomes
Fixed ACH estimate with a true-up clause
Hypothetical only. An agreement uses a 10% specified percentage, defines covered monthly receipts, and includes a reconciliation process. In April, the business identifies $80,000 in contract-defined receipts. Ten percent is $8,000. Its bank records show $11,000 in ACH collections during April.
The apparent $3,000 difference gives the business a reason to submit its records. It does not prove a $3,000 refund or credit. The agreement may use a different review period, treat particular receipts differently, account for prior activity, or provide only for a future debit change.
Fixed installment or minimum payment with no mandatory true-up
Hypothetical only. A business’s gross sales fall from $100,000 to $65,000, but its agreement requires a fixed weekly payment or minimum payment and has no mandatory reconciliation language. The decline may be a real operating problem, yet it does not alone establish a right to reduce the debit.
That business may need to discuss an accommodation, modification, restructuring, or payoff comparison instead. Each requires its own documentation and written terms.
Check the Provider’s Response Before Treating It as Final
| Response item | Compare it with | Why it matters |
|---|---|---|
| Review period | The clause and dates in your request. | A different period can change the outcome. |
| Receipts base | The contract definition and source reports. | Gross sales, settlements, and bank deposits may not be the same measure. |
| Specified percentage | Executed agreement and amendments. | The calculation should use the applicable contract term. |
| Collections counted | Your bank ledger. | A missing or duplicated ACH debit can distort the comparison. |
| Credit, refund, or new debit treatment | The remedy language in the clause. | Past collection treatment differs from a future payment change. |
| Effective date | Written confirmation and the next withdrawal. | An approved adjustment may not take effect immediately. |
| Missing-record or default rationale | Agreement terms and your attachment index. | This shows whether clarification or qualified review is needed. |
If the provider’s calculation differs from yours, ask for its receipts base, period, percentage, collection count, and stated remedy in writing. If it says the submission is incomplete, ask for a specific list of missing items and the relevant contractual requirement.
If the request is denied or ignored, preserve the correspondence and delivery proof. Review the notices, dispute, default, guaranty, and UCC provisions before deciding on a next step. Do not block ACH debits, move accounts, divert receipts, change processors, stop payment, or otherwise alter performance based solely on a general article. Those actions may have serious agreement- and law-specific consequences.
If a provider asks for online-banking credentials, review the agreement first and consider asking whether statements, exported reports, or another verification method will satisfy the request. For a material request or dispute, seek qualified advice before sharing credentials.
A Lower Debit May Still Leave a Cash Problem
Depending on the agreement’s remedy, a lower remittance may change collection timing, but it may not cover payroll, taxes, rent, supplier bills, inventory, customer refunds, processor reserves, or other financing withdrawals. Update a conservative cash forecast using cleared collection dates rather than booked sales.
Test the proposed payment against weaker weeks and known withdrawals. The daily ACH cash-flow guide and this revenue-based financing affordability review can help frame that work.
When a true-up is unavailable or insufficient, a payoff or refinance comparison should begin with a dated payoff quote and a liquidity review, not assumed savings. Review early payoff and prepayment terms before pursuing replacement financing. If you decide to explore options, you can begin an application with Mulah. Eligibility, available products, and terms vary, and no approval or outcome is guaranteed.
Disclosure Rules Provide Context, Not a Universal Remedy
California’s commercial-financing disclosure regulations describe sales-based financing as financing repaid as a percentage of sales or income where payment amounts rise and fall with volume. The regulations also include transactions with true-up mechanisms for disclosure purposes. California DFPI regulation text
New York’s disclosure rules likewise recognize that estimates can involve minimum payments, threshold-based payments, and reasonably anticipated true-ups. New York 23 NYCRR Part 600
Neither framework replaces an executed contract or supplies a universal process for obtaining a lower payment, credit, or refund.
When to Get Contract-Specific Help Quickly
Prompt state-specific legal and accounting review may be appropriate if the provider asserts default, threatens litigation, raises personal guaranty concerns, references UCC enforcement, requests material banking access, or there is a large unexplained ACH discrepancy. Preserve the agreement, amendments, notices, statements, source reports, payment ledger, and all communications.
Before making any material change in performance, review the agreement’s personal guaranty, UCC, collateral, and default provisions.
Frequently Asked Questions
Does a reconciliation clause automatically lower my daily ACH payment?
Not necessarily. A fixed ACH estimate may continue pending the contract’s reconciliation process, but a clause may specify different triggers, timing, and adjustment mechanics. Some agreements have no usable reconciliation right; others require specific timing and records.
What records should I send with a reconciliation request?
Follow the agreement first. Common records include the executed agreement and amendments, ACH ledger, bank statements, processor or platform reports, support for refunds and chargebacks, a source-to-bank tie-out, and a planning comparison workbook.
Can reconciliation reduce the total amount I have to pay?
Do not assume it will. A clause may address a future estimated debit or a difference in past collections. The remedy language determines whether it refers to a credit, refund, adjustment, or another result.
What if the provider says my request is incomplete?
Ask for a written list of the missing documents and the contractual basis for the request. Keep your original submission and proof of delivery. Material disputes may call for qualified legal or accounting review.
Can a provider increase the remittance after reconciliation?
Possibly. Some clauses operate in both directions when collections are below the stated percentage or another contract measure. Read the whole provision before asking for review.
What if a lower remittance still does not solve the cash-flow problem?
Update the forecast to include payroll, taxes, rent, suppliers, reserves, refunds, and every financing withdrawal. A negotiated modification, payoff comparison, or financing with a better fit for receivables or inventory timing may be worth considering separately.
Sources
- Consumer Financial Protection Bureau, Small Business Lending Rule FAQs
- Consumer Financial Protection Bureau, Section 1071 Final Rule
- Federal Trade Commission, Small-business financing staff perspective
- California Department of Financial Protection and Innovation, Commercial Financing Disclosure Regulations
- New York Department of Financial Services, 23 NYCRR Part 600
Jim M
Jim M contributes educational business funding content for Mulah.com. Articles are produced using Mulah's research, sourcing, fact-checking, and editorial quality process.
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