Most firms are paying for Microsoft 365 licences nobody is using. Not through carelessness, just because nobody checks. People leave, roles change, someone gets bumped to a bigger plan for one feature and never moved back. It adds up quietly every month. Here is how to find the waste and claw it back, without breaking anyone who is actually working.
Where the money leaks
Four places, in order of how common they are. Licences assigned to people who have left and were never deprovisioned. Licences sitting unassigned, bought and never handed out. Users on a bigger plan than they need, often a whole E5 for one feature that a cheaper add on would cover. And disabled accounts still holding a paid licence, which happens when someone is blocked but not cleaned up.
Find it, do not guess
Start in the admin centre billing section, which shows how many of each licence you own versus how many are assigned. The gap is pure waste, paid for and assigned to no one. Then the harder question, who is assigned a licence but not actually using it. The Entra sign in logs and the inactive users report show who has not signed in for 30 or 90 days. Line that up against who holds a licence and the dead weight shows itself. For anything above a handful of users, a short Graph or PowerShell script pulls the whole list in one go rather than clicking through people one at a time.
Reclaim without losing data
Removing a licence is not free of consequences. Pull it from a live mailbox and you start a clock on the mailbox and the OneDrive. So treat a leaver properly first, shared mailbox or hold, OneDrive handed over, which we cover in the leaver checklist. Once the data is safe, remove or downgrade the licence and put it back in the pool. For over licensed users, move them to the right plan rather than cancelling outright.
Stop it creeping back
A one off cleanup saves money once. The waste returns within months unless someone checks. Make it a monthly look at assigned versus used, and fold the licence step into your offboarding so a leaver never keeps a paid seat. This is exactly the kind of recurring check we automate inside a client tenant, so the report lands every month without anyone remembering to run it.