A step by step guide to auditing your Microsoft license usage in 2026. Build the inventory, read the usage data, find idle M365 seats and wrong SKUs, and close the true up exposure before the renewal lands.
A Microsoft license audit run from your own usage data, not the vendor true up worksheet, is the fastest way to find idle seats, wrong SKUs, and avoidable spend.
Key takeaways
Start with an inventory built from your own systems. Pull entitlements from the agreement, assignments from the admin center, and usage from the reports. The audit is the gap between what you bought, what you assigned, and what people use.
Three sources frame every Microsoft audit. Reconcile them against each other, not against the vendor worksheet.
The licensing rules sit in the Microsoft Product Terms and the Microsoft 365 usage reports documentation.
Savings cluster in four places. Work them in order of size and speed, not in order of difficulty.
Compare your plan contents against the published Microsoft 365 enterprise plans to spot duplicate paid tooling.
The usage reports show sign in and feature activity by service. Read them at the user level, not just the tenant level, because the tenant average hides the idle tail.
Microsoft license audit signals and the move they trigger
| Signal | What it means | Buyer move |
|---|---|---|
| No sign in 90 days | Dormant or leaver account | Reclaim the license |
| E5 with no security use | Over assigned SKU | Step down to E3 |
| Paid tool overlaps M365 | Duplicate spend | Retire the duplicate |
A 70 percent tenant average can hide a third of seats at near zero use. The recovery lives in the idle tail, so the audit has to read usage per user.
The true up bills the gap between entitlements and deployment at the anniversary. Reconcile that gap on your own clock, months ahead, so there is no surprise to pay.
Azure and Microsoft cost data can be pulled and analyzed through Microsoft Cost Management.
The common advice is to wait for the EA renewal and let the Microsoft account team run the true up worksheet for you. We disagree. In the Microsoft audits Fredrik Filipsson ran in 2024 and 2025, the worksheet started from entitlements and headcount, which buried 12 to 22 percent of idle seats no one questioned. The buyer side move is to run your own audit from sign in and feature usage months ahead, reclaim and right size before the date, and bring a reconciled position into the renewal. The vendor worksheet is not an audit. It is an invoice waiting to happen.
Source: Redress Compliance advisory engagement file, 2024 to 2025.
The vendor true up worksheet is not an audit. It is an invoice waiting to happen.
Redress engages on Microsoft license audits from the buyer side. Every engagement starts from your own usage and contract data, not from the vendor account team forecast.
Build an inventory from three sources: entitlements from the agreement, assignments from the Microsoft 365 admin center, and usage from the activity reports. The audit is the gap between what you bought, what you assigned, and what people actually sign into and use.
Savings cluster in idle and unassigned seats, over assigned SKUs such as E5 on users who only use E3 features, duplicate third party tools that overlap with M365, and licenses still assigned to leaver accounts. Idle seats are usually the largest and fastest recovery.
Read the usage reports at the user level, not just the tenant level, because a tenant average hides the idle tail. Flag accounts with no sign in over 90 days and E5 seats that never use the security or compliance features that justify the E5 premium.
A true up reconciles entitlements against deployment at the agreement anniversary and bills the gap. Running your own reconciliation months ahead, reclaiming idle seats and right sizing SKUs before the date, removes the surprise and turns the true up into a controlled number.
Downgrade E5 to E3 for any user who never uses the E5 security, compliance, or analytics features that justify the premium. Confirm the feature gap from usage data first, then step those seats down at renewal while keeping E5 where the features are genuinely used.
Run the audit months before the EA or CSP renewal, not at the true up. An early audit lets you reclaim idle seats and right size SKUs before the anniversary, so you bring a reconciled, lower position into the renewal instead of negotiating from inflated entitlements.
Yes. Unassigned licenses, dormant accounts, and leaver seats can be reclaimed and reassigned or removed at the next true count. Reclaiming them before the renewal lowers the baseline the next term is sized against, which compounds the saving over the agreement.
Redress runs a buyer side reconciliation of entitlements, assignments, and usage, reclaims and right sizes before the anniversary, and brings a reconciled position into the renewal. Usage and entitlements are then tracked through Vendor Shield, all from your data.
Redress is independent. Buyer side. Industry Recognized. Five hundred plus enterprise software engagements. $2B plus in client spend under advisory. Read the related Microsoft knowledge hub, the Microsoft licensing guide, and the Vendor Shield program.
A buyer side framework for the Microsoft renewal, the EA framework, the M365 SKU framework, and the buyer side moves across the full Microsoft estate. Used across more than five hundred enterprise software engagements.
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