Paying resellers and referral partners their commission
How a software company records the commission invoices its resellers and referral partners send, from approval to payment and the customer behind each.
By Achekam · · 4 min read · For Software (SaaS) businesses in South Africa, Nigeria, Kenya
Plenty of software companies sell through other people. A systems integrator resells your platform to its corporate clients. An accounting practice refers its clients to your product. An agency in another city bundles your licences into its own service. Each of them expects a share of the revenue, and each sends you an invoice for it, monthly, quarterly or whenever they remember.
Commission is easy to get wrong in both directions: partners paid twice for the same customer, or partners never paid at all because their invoice sat in someone's inbox. Both damage relationships you depend on for sales. This article sets out how to treat partner commission as an ordinary supplier cost, with the checks that stop it leaking.
Commission earned versus commission invoiced
Start with the partner agreement. It should say what the commission is earned on (signed contracts, invoices issued or cash received), at what rate, and for how long after the sale. For most software companies, paying on cash received is safest: you pay the partner once the customer has paid you.
From that rule, build a commission statement each period yourself, listing the customer invoices that earned commission and the amount due on each. Send it to the partner and ask them to invoice exactly that amount. Partners who invoice from their own calculation will sooner or later disagree with yours, and the statement settles it before the invoice exists.
If the commission is earned in one month but the partner's invoice arrives later, your accountant may want the cost in the month it was earned. That can be done with a manual journal at month end and reversed when the invoice is recorded; agree the approach first.
Partners on the supplier list
A business keeps one supplier list in Achekam, with duplicate checks by name or VAT number, and quotations, orders and bills pick suppliers from it. Add each reseller and referral partner to that list once, with their legal name, tax number and bank details.
The duplicate check matters more than it seems. A partner that trades under a brand name and invoices under its company name can easily end up on the list twice, and then nobody can see the full amount you owe it.
Recording the partner's invoice, with VAT only if they charge it
Record each partner invoice as a supplier bill, line by line with VAT. Only include VAT if the partner actually charges it on a valid tax invoice. Many small referral partners are not VAT-registered, and their invoices should be recorded without VAT.
Country details to watch:
- South Africa. Bill lines take 15% or 0% VAT, and bills post input VAT to the ledger. Use 15% only when the partner's tax invoice shows South African VAT.
- Nigeria and Kenya. At the time of writing, bills do not use your own country's VAT rate: they offer 15% or 0% and default to 15%. Do not leave the default on a partner invoice. Record it at 0% and ask your accountant how to capture any VAT the partner charged.
Partner invoices uploaded to Financial Intake become suggested postings that a person approves, but they arrive as journal suggestions, not as bills you can pay from the Bills list. For commission you will pay on terms, record the bill directly.
Approval before the bill posts
A bill without a purchase order waits for approval before it posts. Use that step properly: the approver should compare the partner's invoice with the commission statement you sent, line by line, before approving.
There is one gap to cover by hand. Where a supplier invoice is matched to a purchase order and posted, the supplier's invoice number stops it being posted twice. Commission bills usually have no purchase order, so keep your own record of each partner's invoice numbers and check new ones against it. A duplicated commission invoice is an easy overpayment to make and an awkward one to recover from a partner you still need.
Paying and recording the payment
A bill can be paid in full or in parts from a chosen bank account. Paying a supplier in Achekam only records the payment: no bank payment file is produced. Make the transfer in your own banking, then record it against the bill using the same date and amount, so the bank reconciliation matches.
Before you pay, check whether tax must be withheld. In Nigeria, withholding tax on commission is 5% for resident recipients and 10% for non-residents at the time of writing. The NRS explains who must deduct tax at source, what the return must show for each payee and what happens if you fail to deduct or remit, on its withholding tax page. Kenyan and South African rules differ by type of payment and recipient, so ask your adviser before the first payment rather than after.
Tying commission back to the customer invoices that earned it
Every commission payment should trace back to customer invoices. Keep the commission statement with the partner's invoice, and on the statement list each customer, invoice number, amount received and commission due.
This pays off in three situations:
- A customer asks for a refund. You can see whether commission was paid on that invoice and agree with the partner how it is clawed back.
- A partner disputes the amount. The statement shows which payments were counted.
- Due diligence. Investors ask what share of revenue comes through partners and what it costs. The statements answer both.
For the same discipline applied to outside professionals rather than resellers, see paying counsel and correspondents, and for the duplicate risk in more depth, read catching duplicate supplier invoices.
This month
Write a one-page commission procedure covering when commission is earned, who prepares the statement, who approves the bill and who checks the withholding. Send it to every partner with their next statement, so their invoices start arriving in the shape you need.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
