M365 licences are easy to buy and surprisingly easy to forget about. As teams grow, roles change, and staff move on, licences often stay assigned long after they’re needed. Over time, that quiet overspend can add up to thousands each month – all for software that isn’t being used.
The challenge for many organisations isn’t buying licences; it’s understanding who actually needs them and who doesn’t.
Let’s look at how to track M365 licence usage across your organisation, so you can reduce waste, stay compliant, and make smarter decisions about how your licences are managed.
6 ways to track your M365 licence usage
1. Start in the Microsoft 365 Admin Centre
The quickest way to review licence usage is in the Microsoft 365 admin centre.
- Check licence totals: go to Billing → Licences to see how many licences you’ve purchased, how many are assigned, and how many are still available. You can click into each subscription to view the users assigned to it and export the list to CSV.
- Review usage trends: navigate to Reports → Usage and open Active users – Microsoft 365 Services. Choose a timeframe (7, 30, 90 or 180 days) to see how many users are actively using services such as Exchange, OneDrive or Teams. Export the report if you want to filter the data by department or licence type.
- Check permissions: only certain admin roles can view usage reports. If you can’t access them, ask a global admin to grant the appropriate reporting permissions.
This method is quick and easy, but it doesn’t offer advanced filtering or automation.
2. Identify inactive users
Unused licences are often assigned to accounts that haven’t been active for months.
To find them:
- Go to Reports → Usage → Active users – Microsoft 365 Services.
- Export the report for the last 30 or 90 days.
- Filter the CSV to find users with no activity across Microsoft 365 services.
If a user has left the company or changed roles, you can reclaim or downgrade their licence.
3. Use PowerShell and Microsoft Graph for deeper reporting
For larger organisations, scripts provide much more visibility.
Using PowerShell and Microsoft Graph, you can:
- List all subscriptions and licence counts
- See which licences are assigned to each user
- Group licence data by department or team
- Export detailed reports for analysis
You can also pull sign-in data to identify inactive users. Just be careful when automating licence removal so that important accounts (like executives or service accounts) aren’t affected.
4. Automate licence clean-up
Automation helps prevent licences from being wasted over time.
Examples include:
- Automatically removing licences from accounts that haven’t signed in for a set period (for example, 60 days).
- Group-based licensing, where licences are assigned to Azure AD groups instead of individuals. When a user moves departments, their licence changes automatically.
Always test automation with a small group first to avoid accidental access issues.
5. Consider third-party tools
Microsoft’s native reports don’t always show unused licences by department or product. Third-party tools can fill this gap.
Options include:
- Interactive reporting scripts that generate HTML dashboards showing unused licences and inactive users
- MSP reporting tools that track licence usage across multiple tenants
- Power BI usage analytics dashboards for deeper reporting across Microsoft 365 services
These tools often provide alerts and scheduled reports to highlight wasted licences.
6. Best practices for licence optimisation
A few simple habits can help keep licence costs under control:
- Set alerts when licence usage approaches limits
- Run regular audits (monthly or quarterly)
- Remove or archive inactive mailboxes for departed employees
- Right-size licences by downgrading users who don’t need premium features
- Keep reporting visible by ensuring usernames aren’t anonymised in exports
Regular reviews help ensure your M365 licences match how your organisation actually works.
Final thoughts
Keeping track of M365 licence usage doesn’t have to be complicated, but it does need to be consistent.
By regularly reviewing the reports in the admin centre and using PowerShell or analytics tools for deeper insights, you can quickly see which licences are being used—and which ones aren’t.
Over time, these small checks 
make a big difference. They help prevent wasted spend, keep your organisation compliant, and ensure employees have access to the tools they actually need.
In short, better visibility leads to smarter licence decisions and better value from your Microsoft 365 investment.