With Microsoft implementing new license validation changes, understanding the grace period is critical.
Here at DynaOps365, we want to provide a clear guide so you can prepare for these updates and avoid service disruptions.
This article directly answers the crucial question: what happens when the Dynamics 365 license grace period ends?, and gives you a proactive plan to ensure your organization remains compliant.
The grace period itself is a transitional timeframe designed to help customers prepare for new compliance notifications and license enforcement policie.
It begins on the effective date of your organization’s D365 F&O subscription renewal in FY25 Q4 or FY26 Q1 and lasts for 12 months from that renewal date.
The Consequences: What Happens When the Grace Period Ends?
If your organization’s grace period expires without resolving licensing issues, there are significant consequences:
- Unlicensed and under-licensed users’ access to the Dynamics 365 Finance and Operations apps will be disabled. Users will lose access and be prompted to request the necessary licenses from their administrator.
- Microsoft reserves the right to back-bill for unlicensed usage discovered during compliance audits, in accordance with your product and contract terms.
How to Avoid Penalties: A Proactive Action Plan
The key to avoiding these penalties is to proactively audit user access in Dynamics 365 before your grace period concludes. Follow these essential steps.
1. Fulfill Mandatory License Assignments
Beginning November 1, 2025, all users must have licenses assigned directly through the Microsoft 365 admin center.
It is recommended to assign these at least 24 hours before a user needs access.
2. Utilize Enhanced Reporting Tools
You have access to several powerful tools to get a clear view of your licensing needs:
- Power Platform admin center (PPAC): Use this to access comprehensive license usage reporting, see available vs. assigned seats, and review the “Finance and Operations User license level overview report”.
- Dynamics Lifecycle Services (LCS): LCS provides administrators and partners with the same reporting information available in PPAC for consistent analysis.
- In-product Reporting: The “User Security Governance License Usage Summary Report” within D365 F&O helps you understand what drives a user’s license requirement by breaking down their roles and privileges.
3. Regularly Review and Verify
A continuous review process is critical for ongoing compliance.
- Regularly check per-user license assignments in the Microsoft 365 admin center.
- Verify each user’s security roles within D365 F&O to confirm alignment with their license entitlements.
- Remember that if a user has multiple security roles, the highest license requirement among those roles will apply.
Conclusion
Proactively managing your user licenses during the grace period is the only way to guarantee a smooth transition and avoid penalties.
By following the steps above and using the available reporting tools, you can ensure your team maintains continuous access to Dynamics 365 applications.
For a complete overview of all compliance topics, be sure to read our comprehensive Dynamics 365 License-Compliance Handbook.