Microsoft 365 licensing rarely gets cleaned up as staff leave, change roles, or move to different tiers. The result, in almost every business we review, is a handful of licences being paid for every month with nobody actually using them.
Where Wasted Licence Spend Actually Comes From
- A departed staff member's licence never cancelled after offboarding
- A licence assigned during onboarding for a role that changed before it was ever used
- Someone on a higher-tier licence (Business Premium, E3, E5) than their actual usage justifies
- Add-on licences (Teams Phone, Power BI Pro) purchased for a trial or project that never got followed through
How to Actually Find This
Step 1: Pull a Current Licence Assignment Report
The Microsoft 365 admin centre shows every licensed user and which SKUs they're assigned. Export this as a starting inventory.
Step 2: Cross-Reference Against Active Staff
Compare the licence list against your actual current staff list, not your HR system's list from six months ago. Any licence assigned to someone no longer with the business is immediate, safe savings - see our Microsoft 365 offboarding checklist for how this should have been caught at the time.
Step 3: Check Last Sign-In Activity
Entra ID sign-in logs show when each account last logged in. Accounts with no recent activity are worth investigating - some are legitimately inactive (long service leave), but many are simply unused licences nobody's noticed.
Step 4: Compare Tier to Actual Usage
Review what each licence tier actually includes against what the person genuinely uses. Someone paying for Business Premium's advanced security and device management features while only using email and Word may be a candidate for a lower tier, or vice versa if they need features they don't currently have.
What to Do With What You Find
Before removing any licence, confirm it isn't a shared mailbox, resource account, room/equipment booking account, or a genuinely inactive staff member on approved leave - these can look unused but still need to remain licensed or exempted correctly. Once confirmed, reassign or cancel the licence at your next billing cycle.
Where This Fits Into Broader Cost Control
A licence audit is one piece of a wider SaaS spend problem most businesses have - not just Microsoft 365, but every subscription accumulated over time. See our guide on SaaS management for Perth businesses for the broader approach to auditing and controlling software spend.
Frequently Asked Questions
How much can a typical small business save from a licence audit?
It varies, but finding even a handful of unused or over-tiered licences on a 20-30 person business commonly represents several hundred to over a thousand dollars a year in avoidable spend - not transformational, but a genuinely easy saving once identified.
Should I cancel a licence the moment I see it's unused?
Confirm first that the account isn't a shared mailbox, service account, or someone on extended leave before removing a licence - some of these need to keep their licence even without regular sign-in activity. A quick check avoids accidentally breaking something.
How do I know if someone's on the wrong licence tier?
Compare actual usage - do they use Teams Phone, Power BI Pro, or advanced security features - against what their current licence includes. Someone on Business Premium who only uses email and Word may not need the higher tier at all.
Is this a one-off exercise or should it be repeated regularly?
It's worth repeating at least annually, and ideally whenever staff numbers change meaningfully. Licence waste accumulates the same way permissions creep does - gradually, through role changes and departures that don't get followed up.
We run periodic licence audits for Perth businesses as part of our Microsoft 365 management, catching wasted spend before it adds up.
Microsoft 365 Services →Not sure how many of your Microsoft 365 licences are actually being used?
Use our free Licence Waste Calculator for an instant estimate, or call 0433 087 091 - we'll run a free licence audit and show you exactly what's being wasted.
Calculate My Wasted SpendFor related reading, see our guides to SaaS management for Perth businesses and Microsoft 365 Business Premium vs Standard.