luckpandaTL;DR: A backorder is an order a seller accepts for an item that is out of stock right now, promising to ship it when new stock arrives. "Backordered" means you have bought it and it is coming, just later. Out of stock means you cannot buy it at all. In the US, the FTC's mail-order rule makes the seller ship within the promised time (or 30 days) or offer you the choice to cancel.
A backorder is a customer order that cannot be filled from current inventory but that the seller has accepted anyway, to be shipped once the supplier or production line replenishes the item. The order stays open, often with payment taken or authorised, and the item is shipped when it arrives. If you see "backordered" on a website or an order confirmation, the seller is saying: the item is not in the warehouse today, it is expected, and your order is in the queue.
What does backordered mean on an order?
"Backordered" on an order status means at least one item in your order has no stock to ship from, and the seller is waiting on replenishment. What usually happens next:
- The rest of the order may ship now (a partial shipment), with the backordered line following later, or the whole order is held until everything is in.
- You get an expected ship date, sometimes a date range such as "ships in 2 to 3 weeks".
- When stock arrives, orders are usually filled first come, first served, by order date.
- If the date slips, a good seller tells you and offers to cancel.
Whether you are charged now depends on the store. Many card setups authorise at order and capture at shipment; others charge immediately. Either way, the item is reserved for you once stock lands.
Backorder vs out of stock vs pre-order: what is the difference?
Backorder, out of stock and pre-order describe three different promises. The table shows how each one works.
| Backorder | Out of stock | Pre-order | |
|---|---|---|---|
| Item exists and has been sold before | Yes | Yes | No, not yet released |
| Can you place an order? | Yes | No | Yes |
| Restock expected? | Yes, with a date or estimate | Unknown or no | Yes, at launch |
| Typical cause | Demand ran ahead of supply | Seller stopped selling or has no supply date | New product or edition |
| Seller's stock record | Negative available quantity or committed demand | Zero, sales blocked | Zero, launch-date allocation |
| Example | A popular kettle sells out; next container lands in 3 weeks | A discontinued colour | A phone announced for next month |
"Temporarily out of stock" sits in between: the item will return, but the seller is not taking orders yet.
What causes backorders?
Backorders happen when demand runs ahead of available supply. The common causes:
- Demand spikes: a promotion, a viral post, a seasonal peak such as Diwali or Black Friday.
- Supplier delays: late production, raw material shortages, port congestion, customs holds.
- Long lead times: imported goods with 6 to 12 weeks from order to shelf, where a small forecasting miss leaves a gap.
- Inaccurate stock records: the system shows 5 units, the shelf has 0, and orders are accepted against phantom stock. Regular cycle counts fix this one.
- Deliberately lean stock: businesses running just-in-time or made-to-order accept backorders as the price of holding less inventory.
- Reorder points set too low: no safety stock to cover variation in demand or lead time.
What are the advantages and challenges of accepting backorders?
Accepting backorders lets a business keep the sale instead of sending the buyer to a competitor, but it creates an obligation it must meet on time.
Advantages
- Revenue kept. The customer commits now, instead of searching elsewhere.
- Less inventory held. You can carry less stock and buy against confirmed orders, which frees cash.
- Demand signal. The backorder queue tells you exactly how much to reorder.
Challenges and costs
- Cancellations and refunds. The longer the wait, the more buyers cancel. Refund handling costs time and card fees.
- Customer service load. "Where is my order?" messages pile up.
- Split shipments. Shipping part of an order now and the rest later can double delivery cost.
- Reviews and repeat business. Missed dates hurt more than honest long dates.
- Legal exposure. In the US and UK, there are hard time limits (below).
What are the legal rules for backorders?
Backorders sold online or by phone come with legal duties to ship on time or let the buyer cancel. Two of the clearest rule sets:
United States: the FTC Mail, Internet, or Telephone Order Merchandise Rule
The FTC rule at 16 CFR Part 435 applies to goods ordered by mail, online or by phone:
- Reasonable basis to ship. You may only take the order if you reasonably expect to ship in the time you state. If you state no time, you must ship within 30 days of receiving a complete order, or 50 days if the buyer applies to you for credit to pay (section 435.2(a)).
- Delay notice. If you cannot ship on time, you must offer the buyer the option to consent to the delay or cancel for a full refund, and give a definite revised shipping date, or say you cannot estimate it (section 435.2(b)(1)).
- Delays of 30 days or less beyond the original date: if the buyer does not respond, they are treated as having agreed to the delay.
- Delays over 30 days, or indefinite: the order is cancelled automatically unless you ship within those 30 days or the buyer expressly agrees. A buyer who agrees to an indefinite delay can still cancel at any time before shipment.
- Refunds: within 7 working days for cash, cheque or money order payments, and within 1 billing cycle for credit (section 435.1).
- Records: if you cannot show systems that ship orders on time, the FTC presumes you had no reasonable basis to promise the date (section 435.2(a)(4)).
United Kingdom: Consumer Rights Act 2015
Section 28 of the Consumer Rights Act 2015 says that unless a delivery period is agreed, goods must be delivered without undue delay and no later than 30 days after the contract is made. If you miss an agreed or essential date, the consumer can treat the contract as ended and get a refund.
This is information, not legal advice; check the rules where your buyers are.
How do I manage backorders well?
Managing backorders well means promising a date you can meet and keeping the buyer informed until it ships.
- Turn it on per item, not store-wide. In Shopify, for example, the per-variant setting "Continue selling when out of stock" lets the available quantity go negative. Enable it only for items with a confirmed supplier date.
- Show the date on the product page and the order confirmation. "Ships by 12 November" beats "Backordered".
- Base the date on the purchase order. Use the supplier's confirmed delivery date plus your receiving and packing time, not a guess.
- Fill in order-date sequence when stock arrives, and ship the same day if you can.
- Tell buyers early when a date slips, with a cancel option. Under the FTC rule, you have to.
- Decide on payment. Authorise at order and capture at shipment where your processor allows it, or charge and refund promptly on cancellation.
- Offer an alternative. A similar item in stock, or a partial shipment.
- Track the backorder rate (below) and fix the cause, not just the symptom.
How do I reduce backorders?
Reducing backorders comes down to buying earlier and knowing what you actually have.
- Set reorder points with safety stock. Reorder point = average daily demand x lead time in days + safety stock. If you sell 20 units a day and the supplier takes 14 days, reorder at 280 units plus your buffer.
- Count regularly. Cycle counts of your fastest movers keep the system quantity honest, so you do not sell stock you do not have.
- Watch supplier lead times. Record promised and actual delivery dates on every purchase order and use the actual.
- Forecast promotions. Order ahead of planned sales.
- Hold a second supplier for your top sellers.
How do backorders work in accounting and inventory records?
A backorder is an open sales order line, not a sale yet. Under accrual accounting, revenue is recognised when control of the goods passes to the buyer (IFRS 15 and the US equivalent, ASC 606), which is normally at shipment or delivery. So:
- Invoice only what you ship. If 6 of 10 units ship, the invoice is for 6; the other 4 stay on the sales order as backordered.
- A payment taken in advance is a liability (customer deposit or contract liability) until the goods ship.
- Your stock record shows the item as committed. Available quantity = on hand minus committed, which can go below zero while backorders are open.
Backorder rate measures how often you could not fill orders from stock:
Backorder rate = orders with at least one backordered line / total orders x 100
If 18 of 600 orders this month had a backordered line, the backorder rate is 3%. Track it monthly by item and supplier.
LuckPanda's Inventory module is being built so that sales and purchase documents move stock directly, which is what makes committed and available quantities trustworthy. Buying the replacement stock starts with a purchase order, and repeat supplier orders can sit on a blanket purchase order.