Microsoft 365 licence audit: stop paying for accounts nobody uses

Most businesses with more than a handful of staff are paying for at least a few Microsoft 365 accounts that nobody logs into any more. A thread on the r/Office365 community put it bluntly: eight E3 licences left active after staff departed, burning through £240 a month without anyone noticing. The culprit wasn’t negligence exactly, it was a broken offboarding process.

When someone leaves, there’s a lot happening at once. Email gets forwarded, passwords get reset, Teams access gets removed. In the middle of all that, the licence often just doesn’t get pulled. The account sits there, blocked, quietly costing you money every single month.

Finding the ghost accounts

The Microsoft Entra admin centre (entra.microsoft.com) is the starting point. Go to Identity, then Monitoring and health, then Usage and insights, then Licence utilisation. You’ll see every licensed user and their last sign-in date. Any account that hasn’t been active for 30 days or more is worth investigating. Cross-reference against your staff list and flag anything that looks like a former employee.

Pay particular attention to shared mailboxes. A common mistake is converting an account to a shared mailbox (which is free) but forgetting to remove the full licence attached to it. That’s a paid seat doing nothing.

For a business with 20 staff on E3 licences at around £18 per person per month, even three or four ghost accounts is over £700 a year. Across larger teams, it adds up considerably faster.

The offboarding checklist that actually works

The fix is a short, written process that everyone with admin access follows every time someone leaves:

1. Block sign-in the day the person departs, don’t wait for HR to finish the paperwork.
2. Reset the password and revoke all active sessions.
3. Archive the mailbox if you need to keep the data.
4. If the email address stays in use, convert the account to a shared mailbox, then remove the licence the same day.
5. Remove the user from Teams, SharePoint, and any distribution lists.
6. Reassign the freed licence if someone else needs it.
7. Log what you did and when, a single spreadsheet row is enough. Step four is where most businesses lose money. The conversion to a shared mailbox feels like the job’s done, and the licence removal gets forgotten. Make it a rule: conversion done, licence removed that afternoon, no exceptions.

Making it foolproof going forward

If staff turnover is occasional, the checklist above is enough. If you’re larger and people move in and out regularly, group-based licensing in Entra is worth setting up properly. Licences follow roles rather than individuals, so when someone’s role changes or they leave, the assignment updates automatically. More work to configure the first time, but it removes the human error entirely.

Either way, run the audit once to clear the backlog, then build the process so it doesn’t happen again.

A monthly Microsoft 365 bill that quietly creeps upward is one of those things that’s easy to ignore until you actually look at it. Dragon Digital runs licence audits and sets up proper offboarding processes for businesses across North Wales, worth a conversation if your bill’s been drifting and you’re not entirely sure what you’re paying for.