How to Audit Your Microsoft 365 Licenses and Stop Paying for Empty Seats

Your Microsoft 365 bill arrives every month and it is easy to treat it as just another cost of doing business. However, much of that spending may be going to waste. Licenses often remain assigned to former employees or to staff who don’t need premium features which a problem known as SaaS sprawl. This silent drain on your budget can be addressed quickly (sometimes in just a few hours). A Microsoft 365 cleanup isn’t about cutting corners. It is about using resources wisely and ensuring every license serves a purpose. Let’s stop paying for empty seats and reclaim that value.

This is how it happens: Sarah in marketing left the company three months ago. Her account was disabled but her $23/month license was never reclaimed. Maybe the sales team was set up with top-tier E5 licenses years ago for a single feature they rarely use but those licenses remain active. It is not anyone’s fault. Small oversights add up over time. The good news is that it is easy to fix. Your Microsoft 365 admin center has all the tools you need. It is just a matter of identifying and reclaiming unused licenses.

Your Step-by-Step Hunt for Wasted Licenses

Start by logging into the Microsoft 365 admin center. Navigate to Users and then Active users. Even though it says “active”, we are searching for inactive accounts. Use the Filter option to select sign-in status and look for users with no activity in the last 30 days. This gives you a list of potential ghost accounts. Export the list if you like. Your goal is straightforward. For any user who hasn’t signed in for 90 days or anyone you know has left, remove their license to stop unnecessary costs.

Check the Licenses and Apps column. This is where potential savings are hidden. You will see a mix of Business Basic, Standard, Premium and possibly E3 or E5 licenses. Ask yourself whether each user truly needs all the features included in their plan. For example, does someone really need the advanced tools in an E5 license or would a Standard plan suffice? Often the answer is the latter. Adjusting licenses to match actual needs without taking away essential tools can unlock significant cost savings.

Turning Findings Into Real Savings

Now it is time to act. For inactive users, you have two options. If you are certain they won’t return and their data isn’t needed, you can delete the account. A safer approach is to remove the license and block sign-in. This converts the mailbox to a shared mailbox (free of charge) which preserves all of the data while immediately freeing up the monthly cost. For active users on the wrong plan, simply adjust their license. Downgrading from E5 to E3 or Business Premium happens instantly with no loss of emails or files. The only change is a few unused features that will disappear from their portal.

This isn’t a one-time fix. Without a repeatable process, those unused licenses will creep back next year.

• Integrate license reclamation into your HR offboarding process. Once an employee departs, removing their license should happen immediately after disabling their account.
• Schedule a quarterly 30-minute check of the “last sign-in” report to catch unused accounts before they cost you.
• For team accounts like “info@company.com” use a shared mailbox instead of assigning a full user license. You get the same functionality at no extra cost.

Reclaim Your Microsoft 365 Budget

Think about what reclaimed funds could do for your business. You could get a new software tool for your team, a bonus for a top performer or simply a healthier bottom line. Conducting a Microsoft 365 audit is a high-impact and low-effort way to put your resources to work. It turns you from a passive subscriber into an active manager and makes every license count for your budget and your company’s success.

Don’t waste money on unused licenses. Sound Computers can help by running a thorough audit, setting up automated checks and ensuring your Microsoft 365 spending is as efficient and effective as the rest of your operations. Contact us today to get started. 

Article FAQ

How much can a small business actually save?

Many companies are surprised to find they are wasting 10–20% of their Microsoft 365 license fees. For a 50-person business, reclaiming just five unused licenses can save over $1,500 annually. That is real money back in your budget.

Will users lose their emails if I change their license?

No. Changing a license tier (such as from E5 to E3) only affects the apps they can access. Their mailbox, documents and other data remain safe and unchanged.

What is the easiest first step?

Log into the Microsoft 365 admin center, filter users by “Last sign-in” and check for accounts inactive for 90 days or more. Remove licenses for former employees. It is an easy win that takes just a few minutes.

How do we prevent this from happening again?

Make license reclamation part of your employee offboarding process. HR notifies IT when someone leaves and IT immediately reclaims the license. Simple, consistent and effective.

Is this worth it for a small team?

Absolutely. Even a 10-person team paying for a single unused license wastes over $200 a year. That is money better spent on tools you actually use or a team perk. Every dollar counts.