How to Run an M365 Licence Audit Before Microsoft's July Price Rise

Why this matters now

Microsoft's price restructuring lands on 1 July 2026. If your renewal falls in the second half of the year, you are going to pay more, and the question is how much more. Most organisations I speak to have at least 10-15% of their M365 seats assigned to people who either no longer work there, barely use the service, or are on a tier they don't need. Cleaning that up now, before your renewal conversation, puts you in a much stronger position.

This is not complicated work. You do not need a third-party tool to get started. Everything you need is already in the admin centre.

Step 1: Pull the usage reports

Go to admin.microsoft.com and navigate to Reports > Usage. The reports you want are:

Email activity shows you who has sent, received, or read email in the last 90 days. Zero activity for 90 days is a strong signal.

Microsoft Teams user activity shows active days, calls, meetings, and messages. Again, filter for zero-activity users over 90 days.

SharePoint site usage and OneDrive activity round out the picture for users who might be doing file work but nothing else.

Export each report to CSV. Cross-reference them. You are looking for users who show little or no activity across all three. That is your initial list for review.

One important note: check with HR before you action anything. Parental leave, long-term sick, and secondments all show up as inactive in usage data. Usage reports identify candidates, not decisions.

Step 2: Identify who to move and where

Once you have your inactive list sorted, the next question is what to do with each person. Broadly, the options are:

For confirmed leavers, remove the licence entirely and check whether the account has been properly offboarded. In my experience, about half of zero-activity accounts in a typical 200-person tenant belong to people who left months ago but were never fully cleaned up.

For light users who are genuinely active but only use email and Teams, consider whether they need Business Premium or E3 at all. Microsoft 365 F1 at around £2.25/user/month covers Teams, Exchange, and basic productivity. Moving 30 users from E3 to F1 saves roughly £900/month. That adds up.

For heavy users currently on E3, look at whether they are actually using the features that justify E3 over Business Premium. If they are not in a regulated industry and are not running Power Platform, there may be a case to move downwards.

Step 3: Switch to group-based licensing

If you are still assigning licences manually per user, this is the change that pays dividends over time.

In the Entra admin centre, go to Identity > Billing > Licenses > All products. Select the licence plan, then choose "Licensed groups." Assign the licence to a security group rather than individual users.

From that point, any user added to the group gets the licence automatically on day one. Any user removed from the group loses it the same day. No more forgotten licences sitting on leavers' accounts for three months because someone forgot to raise an IT ticket.

Structure your groups to reflect your actual role types: frontline workers, office staff, managers, developers. Each gets the licence tier that matches what they actually do. New starters are dropped into the right group during provisioning and everything else follows.

Step 4: Review your E5 seats

E5 is expensive, and it is often assigned too broadly. At roughly £50/user/month more than E3, every E5 seat needs to justify itself.

E5 makes sense for security teams using Microsoft Defender XDR, compliance teams running eDiscovery and Purview, and users who genuinely need Entra ID P2 features like Privileged Identity Management or risk-based Conditional Access.

It does not make sense for a finance manager who got E5 because it was "the top plan" during a migration three years ago and nobody has revisited it since.

Pull your E5 users and check each one against the feature list. Go to security.microsoft.com and compliance.microsoft.com to see who is actually active in those portals. If someone has not logged into either in 90 days, the E5 premium is almost certainly wasted.

Wrapping Up

A thorough licence audit typically takes a day of focused work for a 200-person organisation. In most cases it surfaces enough savings to more than offset the July price rise, and you go into your renewal conversation with real data rather than guesswork.

If you would rather have someone do this properly rather than fitting it around everything else on your plate, our M365 Licence Health Check starts from £995 and gives you a full picture of your estate with specific right-sizing recommendations. Details at cloudbliss.co.uk.