Counting Seats, Not Promises: A Finance-Led Review of Microsoft 365 Spend

The one bill that renews itself

Microsoft 365 has an unusual property among the costs a UK SME carries: it grows without anyone deciding that it should. A leaver in March becomes a renewed licence in September. A six-week pilot in the spring becomes a permanent add-on by the autumn. A storage top-up bought in a hurry during a migration quietly becomes part of the baseline. None of this requires an approval; it requires only that nobody looks.

The result is that licence spend drifts away from headcount and away from genuine need, usually by somewhere between 10 and 20 per cent. That is not money that has to be found in next year's budget — it is money already committed and already leaving the account each month. Recovering it is less a negotiation than an exercise in bookkeeping, and it is one that a finance lead can run without a technical background, provided the exports are in the right shape.

Step one: establish who is licensed

Start in the Microsoft 365 admin centre and export the active user list with two columns added: the assigned licence SKU, and the date of last sign-in. The second column is the one that matters. Microsoft's own reporting will show a sign-in date even for accounts that are only touched by background processes, so treat anything under 90 days as ambiguous and anything beyond it as a candidate for removal.

Cross-reference that list against payroll or your HR system. The gap between the two is almost always interesting: accounts for contractors who finished in the summer, shared mailboxes that were converted to licensed users during a project, and service accounts that somebody licensed because it was simpler than working out the permissions properly.

Step two: establish what each seat actually contains

This is where most audits stop too early. Removing a dormant seat saves one licence; discovering that twenty healthy seats are paying twice for the same capability saves considerably more.

Build a simple matrix: one row per SKU in your tenancy, one column per capability (email, Office apps, device management, endpoint protection, telephony, archiving, advanced identity protection). Then mark which capabilities are already included at the base tier. Any standalone add-on that duplicates a column already ticked is a candidate for cancellation at renewal.

The three patterns that recur most often in UK SMEs are standalone device management bought alongside a licence that already includes it, separate archiving or backup tools layered on top of retention policies that were never configured, and telephony add-ons attached to users who have never made a call through Teams.

Step three: establish what is being consumed, not just assigned

Storage is the quietest line on the bill. SharePoint and OneDrive capacity is usually bought in packaged increments, and once purchased it is rarely revisited. Pull the storage report and compare provisioned capacity against consumed capacity. Where the gap is wide, the add-on can be reduced at the next renewal — and the reduction is permanent, which is the point.

Finally, list every subscription with a start date in the last eighteen months and ask, for each one, whether it began as a trial. Trial conversions are the single most common source of unwanted recurring spend in small tenancies, because the conversion is often automatic and the confirmation email is often filtered.

A worked example: the 40-person firm

Consider an illustrative professional services business with 40 staff and 44 assigned licences at an indicative £30 per user per month.

• Six seats show no sign-in for more than 90 days. Reclaiming them saves roughly £2,160 a year.
• Eight users carry a standalone device management add-on at about £5.20 per user per month, although the base licence already includes the capability. That is approximately £500 a year.
• Twelve users are paying for a separate archiving tool at around £3.50 per user per month while retention policies sit unconfigured. Another £500, plus the argument for configuring retention properly.
• Storage is provisioned at 1TB above the included allowance; consumption is 180GB. Stepping down to a 200GB increment recovers a further £500 or so.
• The four reclaimed seats cover two expected joiners in the next quarter, avoiding £1,440 in new spend.

Total: in the region of £5,000 a year, from an exercise that took under an hour and required no change of supplier. The figures are illustrative and partner pricing varies, but the shape of the finding is remarkably consistent.

Three questions before the 2026 renewal

First: can you show me the per-seat SKU breakdown, with a note of anything added since the last renewal? A supplier who cannot produce this quickly is either disorganised or has something to hide. Either answer is useful.

Second: what are the notice period and the price-change clause, and is there any mid-term true-up? Multi-year agreements often carry annual uplifts and a reconciliation mechanism that charges you at year end for anything added in between. Both belong in the diary, not in a folder.

Third: which add-ons duplicate capability we already own, and what is the exit route for each? Ask for it in writing. A good partner will answer without defensiveness; a poor one will explain why every line is essential.

Make it a ritual, not a rescue

A one-off audit produces a one-off saving. A quarterly review produces a habit, and the habit is what protects the budget between renewals. Give the spreadsheet a single owner — finance rather than IT, in most cases — diarise it for the first week of each quarter, and keep a short decision log recording what was removed, what was retained and why. When a future joiner needs a licence, the first question should be which dormant seat they can inherit, not which SKU to buy.

The objective is not to squeeze Microsoft or to punish a partner. It is to ensure that the recurring line on the management accounts corresponds to something real inside the business. That correspondence, checked four times a year, is worth more than most cost-cutting exercises — and it costs an afternoon.