What Is a Backorder? How ERP, Ecommerce, and Accounting Integration Improves Order Management

Key Takeaways

• A backorder is a sale made against expected inventory. The customer can buy now, and the product ships when stock is replenished.
• Backorders are different from out-of-stock items. Out-of-stock items can't be purchased; backordered items can, usually with an expected ship date.
• Many backorders are caused by disconnected systems, not supply problems. When your store shows stale inventory counts, it sells units you don't have.
• Backorders have accounting consequences. Money collected before shipment is usually a liability, not revenue, and partial shipments need partial invoicing.
• Integration fixes the root cause. When e-commerce, ERP, and accounting share the same data in real time, inventory stays accurate, backorders are flagged automatically, and the books stay correct.

What Does Backorder Mean?

Backorder means an order has been accepted for an item the seller doesn't currently have on hand, with the expectation that the item will be restocked and shipped within a reasonable time. The order is open, the customer is waiting, and the item is tied to an incoming purchase order, transfer, or production run.

A backordered item has three things attached to it: a confirmed sale, an expected restock date, and an obligation to fulfill. That's what separates it from a wish list, a "notify me when available" signup, or a canceled order.

Backorder vs. Out of Stock vs. Preorder vs. Partial Order

These terms are often used interchangeably, but they mean different things for your operations and your books.

Backorder: The item is normally stocked but has temporarily run out. The customer can still buy it, and it ships when replenishment arrives.

Out of stock: The item is unavailable and can't be purchased. There may be no confirmed restock date. The sale is lost unless the customer comes back.

Preorder: The item has never been available yet, such as a new product before launch. Customers buy ahead of the release date.

Partial order (split shipment): An order contains both in-stock and backordered items. The in-stock items ship now, and the backordered items ship later, often as a separate shipment.

Why Do Backorders Happen?

Demand spikes. A promotion, seasonal peak, or viral moment sells through stock faster than the reorder cycle can respond.

Supplier and production lead times. Replenishment has been ordered but won't arrive for weeks.

Low safety stock. Reorder points set too tightly leave no buffer when demand rises or a shipment is late.

Supply chain disruptions. Shipping delays, supplier shortages, and manufacturing problems push arrival dates back.

Inventory drift and overselling. This is the cause most guides mention last, but it's often the most preventable. When your e-commerce store, marketplaces, and ERP don't sync in real time, each channel shows inventory that has already been sold somewhere else. The result is an involuntary backorder, a sale you never intended to make on stock you don't have.

The Life of a Backorder Across Your Systems

To manage backorders well, it helps to see how a single backordered order moves through your business.

1. The customer places the order on your e-commerce store or marketplace.
2. The inventory system checks availability. If stock is short, the order, or part of it, is flagged as a backorder.
3. Payment is authorized or captured, depending on your policy.
4. Purchasing places or confirms a purchase order with the supplier, and the order is linked to that incoming supply.
5. The customer receives an expected ship date.
6. Stock arrives and is received into inventory.
7. The backordered items are allocated to waiting orders, usually oldest first.
8. The order ships, and the customer is notified.
9. Accounting records the sale, the cost of goods sold, and the payment at the right time.

In a disconnected setup, every arrow in that list is a manual handoff: someone exporting orders, someone checking stock, someone updating the store, and someone entering invoices in QuickBooks. Each handoff is a chance for an order to be lost, shipped twice, or recorded wrong.

The Accounting Side of Backorders

Most guides stop at fulfillment. But backorders also affect your financial statements, and this is where many growing businesses run into trouble.

When is backorder revenue recognized?

Under US GAAP (ASC 606), revenue is generally recognized when control of the goods passes to the customer, which for most e-commerce orders happens at shipment or delivery, depending on your terms. That means a backordered item usually isn't revenue yet when the customer pays, even though the money is in your bank.

Customer payments before shipment are a liability

If you charge the customer at checkout, the payment for backordered items is typically recorded as a liability, often called customer deposits or unearned revenue, until the items ship. Once they ship, the liability is moved to revenue.

If your e-commerce integration posts every order to revenue at the moment it's placed, your revenue will be overstated whenever backorders are open, especially at month-end, when orders placed in one month ship in the next.

Card authorizations don't last forever

Many businesses authorize a card at checkout and capture payment when the order ships. Card authorizations typically expire within several days, and the exact window depends on the card network and processor. For long backorders, you'll need a policy: charge upfront and record a customer deposit, or re-authorize the card closer to the ship date.

Partial shipments need partial invoices

When part of an order ships now and part ships later, each shipment should be invoiced or recognized separately. Invoicing the full order at the first shipment overstates revenue. Forgetting to invoice the second shipment loses revenue entirely.

Inventory and cost of goods sold

Cost of goods sold should be recorded when the goods ship, not when the order is placed. In QuickBooks, selling items that aren't on hand can push quantity on hand below zero, which can distort cost of goods sold and inventory value until the stock is received and costs are corrected. The cleaner approach is to keep backordered quantities on an open sales order and create the invoice only when items ship.

Cancellations and refunds

Customers cancel backorders more often than regular orders, especially when delays stretch out. Each cancellation should release the reserved inventory and reverse the customer deposit through a refund, not through a manual journal entry that someone has to remember.

Worked Example: Accounting for a Backorder

A customer orders 10 units of a product at $50 each, for a total of $500, and pays in full at checkout. You have 6 units in stock, and 4 are backordered. Each unit costs you $20. Sales tax and shipping are left out to keep the example simple.

At checkout, you receive $500. Because nothing has shipped yet, you debit Cash for $500 and credit Customer Deposits for $500.

When the 6 in-stock units ship, you move $300 from customer deposits to sales revenue. You also record $120 in cost of goods sold (6 units × $20) and reduce inventory by $120. Customer Deposits now shows $200, which is exactly what you owe the customer for the 4 backordered units.

When the supplier delivers the 4 units, you add $80 to inventory and record $80 in accounts payable.

When the 4 backordered units ship, you move the remaining $200 from customer deposits to sales revenue and record $80 in cost of goods sold. Customer deposits are now $0, and the order is complete.

Now imagine the order was placed on September 28 and the backordered units shipped on October 10. If your store's integration posted the full $500 as September revenue, September would be overstated by $200, and October would be understated by the same amount. Multiply that by hundreds of backorders, and your monthly results stop reflecting what actually happened.

Backorder KPIs Every Business Should Track

Backorder rate: The percentage of orders that include at least one backordered item. Divide backordered orders by total orders and multiply by 100. For example, 84 backordered orders out of 1,200 total orders is a backorder rate of 7%.

Fill rate: The percentage of orders shipped complete from available stock on the first shipment. A falling fill rate is often the first sign of inventory or forecasting problems.

Average backorder age: The average number of days backordered orders have been waiting. Rising backorder age leads to cancellations and customer complaints.

Backorder cancellation rate: The percentage of backorders customers cancel before they ship. A high rate means your delays or communication need attention.

Open customer deposits: The total amount collected for items not yet shipped. This number should match the value of open backorders in your accounting system. If it doesn't, your systems are out of sync.

How ERP, Ecommerce, and Accounting Integration Improves Order Management

Most backorder problems aren't caused by the backorder itself. They're caused by systems that don't share information. Integration fixes this in several ways.

1. Real-time inventory prevents overselling

When your ERP or inventory system pushes available quantities to your e-commerce store and marketplaces automatically, customers see accurate stock. You stop selling units that were already sold on another channel, which eliminates involuntary backorders.

2. Backorders are flagged the moment they happen

An integrated system knows immediately when an order can't be filled from stock. It can flag the order, link it to an incoming purchase order, and show the customer a realistic ship date instead of a guess.

3. Purchasing responds automatically

When backorders pile up for a product, integrated systems can trigger reorder alerts or draft purchase orders, so replenishment doesn't depend on someone noticing a spreadsheet.

4. Split shipments and partial invoices happen correctly

Integration keeps the order, the shipments, and the invoices connected. Each shipment is invoiced once, for the right amount, with no double billing and no forgotten balances.

5. Revenue, deposits, and cost of goods sold land in the right period

When your ecommerce and ERP data flow into your accounting system automatically and follow consistent rules, payments for unshipped items post to customer deposits, revenue posts at shipment, and cost of goods sold matches what actually left the warehouse. Your month-end close gets faster because there's less to fix.

6. Customers stay informed

With order status, purchase order dates, and shipment tracking connected, customers can get automatic updates. Customers are far more patient with backorders when they know what's happening.

7. One version of the truth

Sales, operations, and finance all look at the same numbers. Nobody has to reconcile three different "open orders" reports at the end of the month.

Signs Your Systems Aren't Integrated Well Enough

• Your store regularly sells items you don't have
• Staff export orders from your e-commerce platform and re-enter them in your ERP or QuickBooks
• Customers are told a ship date that turns out to be wrong
• Partial shipments are sometimes invoiced twice or not invoiced at all
• Revenue is recorded when orders are placed, not when they ship
• Inventory in QuickBooks goes negative
• Open customer deposits in your books don't match the open backorders in your store
• Month-end close takes days because orders, shipments, and payments have to be matched by hand

Best Practices for Managing Backorders

Set backorder rules by product. Decide which items can be backordered, how many units, and for how long. Not every product should accept backorders.

Always show an expected ship date. Base it on confirmed purchase order dates, not hope.

Communicate early and often. Send an update when the order is placed, when the ship date changes, and when it ships.

Offer choices. Let customers ship available items now, wait for the full order, substitute a product, or cancel easily.

Review reorder points and safety stock regularly, especially before peak seasons and promotions.

Allocate incoming stock fairly. Fill backorders oldest first unless you have a clear reason to prioritize differently.

Reconcile open orders to your books every month. Open backorders, customer deposits, and open sales orders should all agree.

Automate the data flow between systems. Manual order entry is the most common source of overselling, duplicate invoices, and misstated revenue.

How Autymate Helps

Autymate builds integrations that connect the systems behind your orders, including e-commerce platforms, ERPs, and QuickBooks, so order, inventory, and payment data move automatically instead of being exported and re-entered by hand.

With your systems connected, orders flow into your accounting system with consistent rules, payments for unshipped items can be kept separate from revenue, and your team spends its time on exceptions instead of data entry. If your stack includes a system without an off-the-shelf connector, Autymate's custom integrations team can build the connection.

Frequently Asked Questions

What is a backorder?
A backorder is an order for a product that is temporarily out of stock. The business accepts the order and ships the product when new inventory arrives.

What does "on backorder" mean when shopping online?
It means you can buy the item now, but it won't ship until the seller receives more stock. The seller usually provides an estimated ship date.

What is the difference between backorder and out of stock?
A backordered item can still be purchased and is expected to be restocked. An out-of-stock item can't be purchased and may have no confirmed restock date.

Are backorders good or bad for a business?
Both. Backorders keep revenue coming in during short supply gaps and show real demand. But frequent or long backorders frustrate customers and increase cancellations, especially when ship dates are unreliable.

How do you account for backorders?
Payments collected before shipment are generally recorded as a liability, such as customer deposits or unearned revenue. Revenue and cost of goods sold are usually recorded when the items ship. Partial shipments should be invoiced separately. Confirm the treatment for your specific terms with your accountant.

How do you reduce backorders?
Improve demand forecasting, set realistic reorder points and safety stock, shorten supplier lead times where possible, and sync inventory in real time across every sales channel to prevent overselling.

How does ERP integration help with backorders?
ERP integration keeps inventory, orders, purchase orders, and shipments connected. It prevents overselling, flags backorders automatically, links them to incoming supply, and passes accurate data to your accounting system.

How does QuickBooks handle backorders?
QuickBooks can track open sales orders or estimates for backordered items, depending on your version, and record customer deposits for payments collected in advance. Selling items that aren't on hand can drive inventory negative, so many businesses use an integration to keep e-commerce, inventory, and QuickBooks in sync.

Stop Letting Disconnected Systems Create Backorders

Some backorders come from real supply problems. Many come from systems that don't share information. When your ecommerce store, ERP, and accounting system work from the same data, you sell only what you can deliver, customers get accurate dates, and your books reflect what actually shipped.

Talk to Autymate about connecting your e-commerce, ERP, and QuickBooks data so every order, shipment, and payment is recorded correctly and automatically.