A backorder is an unfulfilled order for a product, service, or component. Inventory management often involves backorders. Backordered items aren’t in stock but should arrive before the transaction closes. A backorder occurs when a client orders an out-of-stock item. 

Common or inexpensive items shouldn’t be backordered. If you offer backorders, be sure the margin reflects the extra logistical labor and you can fulfill orders fast. Several factors determine how long it takes to delivery a backordered goods to a customer.

Backorder procedure? “Backordering” means accepting orders for out-of-stock products. When a back order is received, the inventory management system sends a purchase order to the appropriate department, vendor, or distributor. Support personnel must predict when purchases will be available and how payments will be handled. The merchant choose whether to have the supplier drop-ship products straight to consumers or to accept delivery, convert backorders to sales orders, and ship items to customers before charging their accounts.

Backorders assist firms in many ways. Stores with limited storage capacity may not be able to have a large supply on hand, but they may still enable backorders if they can reliably monitor supplier availability. If a supplier drop-crafts most of their items, they may take backorders and only place an order after a certain amount of backorders. By not transporting products, these firms save on freight.

Both the vendor and the consumer may suffer extra costs for backorders. If the seller doesn’t tell the customer about the backorder, they’ll lose business. Seller-anticipated backorders may be returned due to supply chain issues. This series of events may increase backorder rates and hurt the company’s cash flow and bottom line.