ERPNext Sales Commission: Sales Partners & Incentives

Commission is where sales motivation, accounting accuracy and trust meet, and it is where many ERP projects quietly fall back to Excel. The reason is not that ERPNext lacks the feature. It is that "commission" means several different things: an external agent who gets a percentage of sale value, a salesperson who shares credit on a deal, a dealer who earns a rebate on reaching a target, or a referral fee paid once.

ERPNext has separate tools for these cases, and understanding which to use is the whole job. This guide explains Sales Partner for external parties and Sales Person for your internal team, how commission appears on a Sales Invoice, which reports to run, and, importantly, how commission is actually paid, because ERPNext calculates it but does not pay it by itself. The details follow the ERPNext documentation for Sales Partner.

If your commission links to your sales process, also see ERPNext sales workflow: quotation to invoice and ERPNext CRM.

Sales Partner or Sales Person?

The ERPNext documentation draws a clear line: use a Sales Person for internal sales-team contribution and incentives, and a Sales Partner when the relationship is external and may require commission settlement through a Supplier.

	Sales Partner	Sales Person
Who	External reseller, dealer, agent, affiliate or implementation partner	Your own salesperson, area manager or team lead
Where it appears	Commission section on Sales Order, Delivery Note and Sales Invoice	Sales Team table on the same documents, with contribution percentage
Commission input	Default commission rate on the partner master, editable per transaction when permitted	Commission rate and incentives in the Sales Team row
Targets	Item Group wise targets for a fiscal year, with monthly distribution	Sales Person targets and variance reports
Payment route	Supplier, Purchase Invoice and Payment Entry	Usually payroll, through an Additional Salary or incentive process agreed with HR
Typical business	Distribution, building materials, insurance-style referral, software resellers	Retail chains, field sales, project sales, service companies

A transaction can have both a Sales Partner and Sales Persons. The external partner commission and the internal sales team contribution are separate fields and separate processes, so a deal can pay an agent and credit a salesperson at the same time.

Step 1: Set up Sales Partners

1. Create a Sales Partner Type such as Reseller, Dealer or Affiliate.
2. Open Sales Partner, add a name, partner type and default territory, and enter the agreed commission rate.
3. Add the address and a contact person for statements.
4. If you will pay the partner through payables, create a Supplier for the same party, and keep legal and bank details on the Supplier record.
5. Optionally add item-group targets per fiscal year, with a Monthly Distribution for seasonal businesses.

Referral codes are available for website or e-commerce attribution, where a partner link carries a code. The ERPNext documentation notes that this depends on your website setup, so test a complete checkout with a fresh browser session before launching a partner campaign.

Step 2: Record commission on the sales documents

On a Sales Order, Delivery Note or Sales Invoice, open More Info and the Commission section, select the Sales Partner, review the amount eligible for commission, confirm the rate and check the total. The default rate comes from the partner master, and an authorised user can change it for a specific deal.

Three rules protect you from disputes:

• Decide the commission base in writing. Is it net total before tax, after discounts, or on collected payments only? ERPNext calculates on the amount eligible for commission on the document, so your commercial agreement must match that logic.
• Use submitted documents only. Draft transactions do not appear as confirmed commission activity in the reports.
• Handle returns. A credit note should reduce commission. Agree this in the contract and check your report treatment during testing.

Step 3: Configure internal sales commission

For your own team, create a Sales Person tree that matches your management structure, such as Regional Head, Area Manager and Executive. Link each Sales Person to an Employee when you want incentives to flow into payroll. On a sales document, the Sales Team table lets you split credit across several people by contribution percentage, with a commission rate and incentives per row.

This works well when two people share an order, for example a field executive and a regional head. The contribution percentages must total 100. Review reports by person and by territory to catch overlapping claims.

Common incentive models, and how ERPNext supports them:

Incentive model	How to implement it
Flat percentage of invoice value	Commission rate on the Sales Partner or Sales Team row
Slab-based: higher percentage after a target	Targets and Target Variance reports, plus a monthly calculation sheet or a small custom script reviewed by finance
Commission only after the customer pays	Report on submitted invoices, then filter by paid status from the receivables report before approving payout
Product-wise rates	Different commission rates per item group, usually handled with defaults and a controlled exception process. Test carefully before relying on it
Team pool shared by contribution	Sales Team table with contribution percentages

Complex slab and clawback rules often need a small custom calculation. Keep it simple and documented, because commission formulas are the first thing people argue about. Our note on over-customisation risks explains why we choose standard fields first.

Step 4: Reports you will use

Report	Use
Sales Partner Commission Summary	Calculated commission by sales transaction, filtered by company, partner, document type, date range, customer and territory
Sales Partner Transaction Summary	Partner-attributed transaction details, including item-level context where available
Sales Partner Target Variance	Allocated targets compared with qualifying actual performance by period
Sales Person-wise Transaction Summary	What each salesperson has contributed
Sales Person Target Variance	Performance against target
Gross Profit, grouped by Sales Person	Margin per salesperson. Use it to avoid paying high commission on low-margin deals

If target variance looks wrong, check the fiscal year, item group, monthly distribution, transaction dates and whether the Sales Partner was selected on the transaction. The usual problem is a missing partner on the invoice, not a faulty report.

Step 5: Pay the commission

This is the step teams skip. The commission report does not create accounting entries. A controlled payment process, as outlined in the ERPNext documentation, normally looks like this:

1. Run the commission summary for the period and have the sales head approve it.
2. Make sure the partner exists as a Supplier, ideally in a separate Supplier Group such as "Commission Agents".
3. Raise a Purchase Invoice for the approved commission, using a commission expense account. Attach the statement.
4. Apply the correct tax or withholding treatment.
5. Create a Payment Entry against the invoice, and reconcile the total back to the commission report.

For internal salespeople, hand the approved amounts to HR for payroll, usually as an Additional Salary or an incentive component. Our guides to employee and payroll management and the purchase cycle help you design these handoffs.

Tax note: in India, commission paid to agents may attract TDS, and the rules changed with the Income-tax Act, 2025 from 1 April 2026. Our post on ERPNext TDS setup explains the configuration side. In the UAE and Saudi Arabia, commission invoices from VAT-registered agents carry VAT that you may recover, subject to the rules. Confirm every treatment with your accountant, since we cannot give tax advice here.

Controls that keep commission honest

• Limit who can change the commission rate on a transaction, with field-level role permissions.
• Require approval for any rate above the partner default, using a workflow.
• Review the partner list quarterly. Disable inactive partners instead of deleting them, so the history stays intact.
• Keep contracts and rate letters attached to the Sales Partner record.
• Reconcile the commission payable account to the supplier ledger every month.

How Nexeves helps

We map your commission contract into ERPNext, set up partners, teams, targets and approval flows, and make sure the payout lands in the right ledger. Read about our ERPNext customisation approach, or contact us through the contact page.

Frequently asked questions

How do I set up sales commission in ERPNext?

Create a Sales Partner with a commission rate for external agents, or a Sales Person and Sales Team for internal staff. Select them on the Sales Order, Delivery Note or Sales Invoice, then review commission in the Sales Partner Commission Summary report.

What is the difference between Sales Partner and Sales Person in ERPNext?

A Sales Partner is an external reseller, dealer, agent or affiliate that may be paid commission through a Supplier. A Sales Person is an internal team member whose contribution and incentives are recorded in the Sales Team table.

Does ERPNext pay commission automatically?

No. It calculates and reports the value. Finance must record and pay the approved amount, usually with a Supplier, a Purchase Invoice and a Payment Entry for partners, or through payroll for employees.

Can one invoice have both a sales partner and sales persons?

Yes. The external partner commission and the internal sales team contribution are separate fields and processes.

Can different invoices use different commission rates?

Yes, when permissions and commercial policy allow an exception to the default rate. Control who can edit it, and require approval for exceptions.

Is TDS or VAT applicable on sales commission?

It can be, depending on the country, the payee and the facts. In India, TDS rules for commission changed from 1 April 2026 under the Income-tax Act, 2025. In the UAE and Saudi Arabia VAT may apply on commission invoices. Ask your accountant to confirm.