Link Supplier and Customer with Common Party Accounting

Common Party Accounting is used when the same business party is both a Customer and a Supplier.

For example, a company may usually buy from a party and record Purchase Invoices against them as a Supplier. Later, the same party may buy goods or services from the company, so a Sales Invoice needs to be raised against them as a Customer. Common Party Accounting lets ERPNext link these two party records and adjust balances between them.

This is useful when receivables and payables belong to the same real-world party.

When to use Common Party Accounting

Use this feature when:

The same party exists as both a Customer and a Supplier.
You want to adjust a Sales Invoice against a Purchase Invoice, or the other way around.
You want ERPNext to create the accounting adjustment automatically when the invoice is submitted.

Example scenario

A company has been buying from a Supplier and has unpaid Purchase Invoices. Later, the same Supplier buys something from the company. To record this, the company creates a Customer record for the same party and raises a Sales Invoice.

Instead of separately collecting money and paying the supplier, the outstanding amounts can be adjusted through Common Party Accounting.

Setup steps

1. Enable Common Party Accounting

Go to:

Accounts Settings > Enable Common Party Accounting

Enable the setting and save Accounts Settings.

2. Create or identify both party records

Make sure the party exists in both roles:

Customer
Supplier

These are separate master records in ERPNext, even if they represent the same real-world organization.

3. Link the Customer and Supplier

Create a Party Link between the two records.

If the primary party is a Supplier:

Supplier > Actions > Link with Customer

If the primary party is a Customer:

Customer > Actions > Link with Supplier

ERPNext creates a Party Link so it knows that the Customer and Supplier represent the same party.

Transaction flow

Enable Common Party Accounting
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Create Customer and Supplier records
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Link Customer and Supplier using Party Link
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Create invoice against the secondary party
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Submit invoice
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ERPNext creates adjustment Journal Entry
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Use the advance to reconcile the linked invoice

What happens after invoice submission

After the linked invoice is submitted, ERPNext checks whether Common Party Accounting is enabled and whether a Party Link exists.

If both conditions are met, ERPNext automatically creates a Journal Entry. This Journal Entry creates an advance balance against the linked party.

For example:

A Sales Invoice is created against the linked Customer.
ERPNext creates an advance against the linked Supplier.
That advance can then be reconciled against a Purchase Invoice for the Supplier.

The same idea applies in the opposite direction when the linked party relationship is reversed.

Reconciliation

Once the Journal Entry is created, use the advance amount to reconcile the outstanding invoice of the linked party.

For example, if a Sales Invoice created an advance against the Supplier, that advance can be used to reconcile an outstanding Purchase Invoice.

Important notes

Common Party Accounting works only when the Customer and Supplier are linked using Party Link.
The feature must be enabled in Accounts Settings before ERPNext can create the automatic adjustment.
Customer and Supplier remain separate masters. The link only tells ERPNext that they represent the same business party for accounting adjustment.
Review the generated Journal Entry before reconciliation, especially when using multiple currencies or different receivable and payable accounts.

Summary

Common Party Accounting helps adjust receivables and payables when the same party is both a Customer and a Supplier. After enabling the setting and linking both party records, ERPNext can create the required Journal Entry automatically and make the balance available for reconciliation.