Backorder

A backorder is a customer order for a product that is temporarily out of stock, which the seller accepts and promises to fill once new inventory arrives. Backorders differ from cancelled or lost sales because the customer agrees to wait. They are common in retail, e-commerce and manufacturing, and can be caused by demand spikes, supplier delays or long lead times. A moderate level of backorders can show strong demand, while a persistent one may signal poor forecasting or supply chain stress. In accounting, a backorder usually creates no revenue until the goods ship, and any advance payment is recorded as a liability such as an advance from customer. Businesses track backorders against the reorder point to decide when to buy more stock. Also see Backlog.