How to manage backorders: strategies for growing businesses

What is “backordering” in inventory management?

Backorders occur when customer demand outpaces available inventory, leaving orders open until stock is replenished.

Even growing operations managing multiple suppliers and locations face backorders. Seasonal spikes, supplier delays, product launches, or rapid growth can all create temporary gaps between demand and supply. 

At higher volumes, the real challenge is staying coordinated—knowing exactly what’s on order, what’s committed to customers, and what needs attention next. Clear visibility across teams and locations helps prevent a short-term shortage from turning into a larger operational strain.

Why do companies offer backorders?

Backorders allow businesses to keep sales moving even when inventory levels run temporarily low. Instead of losing demand to a competitor, companies can retain the order and fulfill it once the stock arrives.

When offering backorders makes strategic sense

Backorders can be part of a deliberate growth strategy. They’re often part of a broader inventory and purchasing plan designed to manage variability without slowing momentum. Here are some scenarios when backorders can be a smart business move.

 Demand is consistent and predictable

Historical sales trends show steady, repeat demand, even if inventory cycles fluctuate. A company that sells the same core SKUs each quarter, for example, can accept backorders with confidence because replenishment is already built into its purchasing cycle. Predictable patterns reduce the risk of overcommitting and help ensure backorders remain manageable rather than disruptive.

 Supplier lead times are reliable

When vendors consistently meet agreed timelines, lead times are well documented. If a manufacturer delivers every 30 days without variation, purchasing teams can confidently provide customers with realistic ship dates. Unstable lead times, on the other hand, can quickly create fulfillment bottlenecks.

 Stockouts are growth-driven

Rising order volume, expansion into new regions, or a successful product launch can temporarily outpace supply. A new wholesale partnership or marketplace rollout, for instance, may intentionally create short-term shortages while forecasting adjusts. In these cases, backorders reflect demand momentum rather than breakdowns in inventory control.

Margins can absorb delayed fulfillment

Managing backorders adds administrative oversight and cross-team coordination. Sometimes there are also additional shipping costs. Healthy margins provide the flexibility to manage those added demands without eroding overall profitability.

Customers are willing to wait for high-value or differentiated products

Core products, limited releases, or specialized SKUs often generate demand strong enough to justify a short wait. A proprietary component or best-selling seasonal item may carry enough brand loyalty that customers are comfortable securing their order in advance.

Your systems can track and fulfill backorders without manual intervention

Backorders only make sense if your systems can support them. Open orders need to remain visible to sales, purchasing, fulfillment, and finance so each team works from the same information, and nothing falls through the cracks.

How do backorders differ from stockouts?

A backorder is similar to, but distinct from, a stockout, or out-of-stock (OOS), event. Backorders are customer purchase orders that will be fulfilled but are delayed due to supply chain disruptions, assembly delays, or production timing, such as pre-orders.

Out-of-stock events are items that cannot be purchased by the customer due to supply uncertainty. These items may have completed their production run, been permanently discontinued, or have no confirmed manufacturing or arrival date.

Financial reporting and fulfillment planning both depend on separating backorders from OOS items as operations expand.

• Backorders represent committed revenue and future fulfillment obligations. They affect open order reporting, purchasing plans, and inventory allocation at every site.
• Stockouts influence forecasting decisions and potential lost sales.

Keeping the two properly classified supports reliable financial reporting and more consistent fulfillment planning as order volume and SKU counts increase.

How backordering works in a growing business

When items are in stock, the purchasing process is relatively straightforward. A customer places an order, the SKU is matched, the product ships, and the transaction closes.

Backorders introduce additional coordination. Instead of a simple order-to-ship sequence, teams must track open demand, initiate replenishment, allocate incoming inventory, and ensure fulfillment stays aligned throughout systems. Higher order volume, broader SKU catalogs, multiple vendors, and multi-location operations increase the need for structure and visibility.

A typical backorder workflow includes the following steps:

Step 1: A customer order creates a committed obligation

A customer purchases an item that is temporarily unavailable. The order remains open, creating a fulfillment obligation that must stay visible across sales, operations, and finance.

Step 2: Demand triggers a purchasing action

Inventory data signals the need for replenishment. In growing businesses, reorder points or approval workflows connect open customer orders directly to purchasing activity.

Step 3: A purchase order is issued to the supplier

The purchase order formalizes the replenishment request and documents quantities, costs, and expected vendor delivery timelines.

Backordering example

To see how backorders can support revenue at scale, consider a growing solar equipment company selling direct-to-consumer online, through retail partners, and two regional warehouses.

ABC Corporation sells solar panels for $250 per unit, along with hundreds of SKUs of related accessories.

In the weeks leading up to Earth Day, a national influencer campaign drives demand well beyond projections. The company enters the season with 50,000 core panel units divided between its West Coast and Midwest warehouses, along with wholesale allocations. Early sales data indicate demand will outpace supply.

Instead of marking the SKU out of stock, operations teams:

• Review available inventory by warehouse
• Assess open orders throughout channels
• Confirm supplier lead times
• Determine how many additional units can be committed

After coordinating with the manufacturer, ABC secures an estimated delivery date for additional inventory and accepts 25,000 units on backorder. Combined with the 75,000 units originally projected to sell during the campaign period, total units sold reached 100,000.

Without centralized visibility, monitoring open backorders and SKUs becomes difficult. Inventory can be misallocated, and fulfillment delays compound.

Tools such as QuickBooks Online Advanced help businesses track inventory, purchase orders, and open sales across locations, especially when integrated with inventory apps built for multi‑warehouse management. This reduces manual reconciliation and supports more accurate allocation.

By keeping orders open instead of issuing a stockout, ABC preserves up to $6,250,000 in revenue tied to backordered units while maintaining operational control.

When backorders signal a scaling challenge

Backorders are manageable, but they can also reveal where operational systems are starting to strain. Here are some backorder challenges that scaling companies can sometimes experience.

Inventory complexity is growing faster than your systems

As operations grow, maintaining a reliable view of what’s available—and where—becomes more difficult. Spreadsheets or disconnected tools may not reflect what’s truly available at all your warehouses.

1. Operational visibility is breaking down across locations and channels

Selling through multiple warehouses, retail locations, and online platforms requires consistent allocation rules. Without shared data, teams may oversell or duplicate replenishment orders.

2. Manual processes are becoming a liability—not a workaround

Manual order tracking might have worked when you had lower sales volumes. But as your transaction counts increase, reconciliation becomes time-consuming and prone to error. Open backorders can linger unnoticed, especially when teams rely on separate spreadsheets or email approvals.

3. Rising demand is exposing gaps in forecasting and replenishment

Growth often accelerates faster than purchasing cycles adjust. If reorder thresholds don’t reflect current sales velocity, shortages repeat. Inconsistent forecasting can also tie up capital in the wrong SKUs while high-demand items remain understocked.

4. Backorders are shifting from occasional to operational

Frequent backorders related to the same products, vendors, or regions often signal deeper planning or replenishment issues. What begins as isolated shortages can turn into recurring fulfillment slowdowns. This can impact service levels and customer confidence if left unaddressed.

A connected system that integrates inventory, purchase orders, sales commitments, and reporting can reduce some of these challenges. For example, QuickBooks Online Advanced provides multi-location tracking, customizable reporting, and automated purchasing workflows that help growing businesses maintain control as complexity increases.

What typically causes backorders?

Purchase backorders can happen for a variety of reasons—from an intern forgetting a decimal point to inclement weather. These are the most common causes of backorders affecting midsized businesses today.

Unexpectedly high demand

The most obvious cause for fulfillment backorders is unusual spikes in demand. Seasonality, a viral campaign, or rapid channel expansion can push sales beyond available inventory throughout multiple warehouses or regions.

Extreme weather events

Due to our interconnected global supply chain, production and shipping can be cut off due to extreme weather events such as hurricanes or tsunamis thousands of miles away.

 Manufacturing or production delays

Supplier bottlenecks, raw material shortages, or capacity constraints can delay production timelines without much notice. When a single vendor falls behind, the impact often extends to connected products and sales streams.

Low safety stock

Your safety stock creates a buffer against supplier delays or unexpected demand spikes. Set too low, and backorders become routine. Set too high, and capital gets tied up in inventory that may sit in the warehouse. The right balance affects both cash flow and how reliably each location can fulfill customer orders.

Human error

Incorrect SKU entries, receiving discrepancies, or misallocated inventory can create artificial shortages. As transaction volume increases, even small mistakes can create backlogs that affect every sales channel.

While many of these issues can’t be prevented, stronger oversight can reduce their impact. QuickBooks Online Advanced brings together multi-location inventory tracking, reorder points, and purchase order workflows so teams can spot demand shifts, monitor supplier timelines, and correct discrepancies before backorders escalate.

Why backorders can be positive for businesses 

A controlled level of backorders with predictable fulfillment timelines can offer valuable insight into demand, pricing flexibility, and inventory planning. Here’s how:

Provides a growth roadmap

Tracking backorder trends helps identify which products, regions, or channels consistently outpace supply. That data can guide expansion planning, production increases, or distribution investments.

Indicates potential for price increases

If backlog patterns reflect sustained demand rather than temporary disruption, pricing strategy may warrant review. Strong, recurring demand for a product can indicate pricing flexibility. Market-testing adjustments in high-demand segments may improve margins while demand remains resilient.

Supports inventory investment decisions 

Backorders can reduce the need to overstock slower-moving products while preserving revenue from high-demand items. Reviewing backorder patterns alongside carrying costs helps determine where additional inventory investment is justified—and where it isn’t. Used intentionally, this insight supports more disciplined capital allocation as the business scales.

When backorders can cause problems for businesses 

Backorders can signal strong demand, but they create pressure if they aren’t managed carefully. Long lead times and inventory split between warehouses make it harder to keep orders moving smoothly. Teams end up reacting to delays instead of preventing them, and customers feel the impact.

If backorders become routine or drag on, confidence starts to slip—especially when delivery dates change without clear updates. Better visibility into inventory and purchasing activity gives teams time to adjust plans and keep minor setbacks from turning into larger problems.

Proven strategies to manage backorders effectively

Managing backorders at scale requires more than reactive fixes. Clear processes, timely data, and coordinated workflows help prevent short-term shortages from turning into recurring disruptions.

Maintain real-time inventory visibility across channels

Growing businesses often sell through e-commerce, retail, and wholesale at the same time. Inventory records need to show what’s physically available, what’s already promised to customers, and what’s still inbound from suppliers. When that information lives in one place, fulfillment decisions become faster. Overselling also becomes less likely.

Maintain real-time inventory visibility across channels

Growing businesses often sell through e-commerce, retail, and wholesale at the same time. Inventory records need to show what’s physically available, what’s already promised to customers, and what’s still inbound from suppliers. When that information lives in one place, fulfillment decisions become faster. Overselling also becomes less likely.

Automate purchase orders and reorder points

Manual purchasing creates delays, especially as vendor lists grow. Set reorder thresholds that reflect actual sales velocity and establish clear approval steps so replenishment isn’t dependent on inbox reminders. With tools like QuickBooks Online Advanced, purchasing activity can follow a defined process, reducing slowdowns caused by late reordering or stalled approvals.

Track backorders in your accounting system to protect cash flow

Open backorders represent committed revenue and future fulfillment obligations. Track them within your accounting system to ensure revenue timing, purchasing costs, and inventory valuation remain aligned.

Communicate proactively with customers

Customers tend to be more patient when expectations are clear from the start. Share realistic arrival dates, update them if timelines change, and make sure service teams are working from current order information.

How to manage backorders to protect customer relationships

Proactive, coordinated communication across teams and channels is essential when managing backorders. A structured approach helps reduce cancellations, maintain customer confidence, and preserve committed revenue.

Update your sales channels

If the delay is manageable, place a notice on the relevant product pages indicating the item is backordered. Include an anticipated ship date to set expectations, and ensure timing updates are reflected in each fulfillment location and customer-facing system.

Capture demand systematically

On the product page, offer customers the option to receive availability updates. Store contact details in your CRM or order management system so interest is recorded centrally and can be activated once inventory returns.

Inform existing buyers

Share the revised arrival timeline and outline what happens next. Reinforce the value of the relationship and clarify any service adjustments, such as expedited shipping or partial fulfillment.

Re-engage once inventory returns

When stock becomes available, prioritize fulfillment for backlogged orders. Then, coordinate outreach to documented prospects through marketing and sales channels to convert preserved demand efficiently.

Using backorder data to drive growth

If you decide to incorporate backorders into your operating model, the data behind them can guide smarter scaling decisions.

Identify sustained demand signals

Recurring backorders tied to specific SKUs, regions, or customer segments can reveal where demand consistently exceeds supply. That pattern may support increased production, expanded vendor capacity, or adjusted inventory placement. For example, repeated backlog in one region may indicate the need to reposition stock or increase fulfillment capacity there.

Refine pricing and marketing focus

Strong demand despite extended lead times can signal pricing flexibility or product differentiation. Backorder trends may also highlight which products warrant greater marketing investment, and which do not.

Strengthen your inventory operations for what’s next

Backorders are a natural part of growing demand. Managed well, they can support revenue continuity, strengthen customer relationships, and provide insight into where your business is gaining traction.

As operations expand—more SKUs, higher order volume, additional fulfillment locations—the way you handle backorders becomes more important. Sustained growth requires structured purchasing, reliable reporting, and transparent oversight of inventory commitments, open purchase orders, and vendor timelines.

QuickBooks Online Advanced supports growth-stage complexity by helping teams:

• Track inventory in multiple warehouses and fulfillment locations within one connected system
• Monitor open inventory commitments and outstanding purchase orders before stock arrives
• Manage purchasing workflows with defined approvals and documentation
• Generate location-level reporting that strengthens financial decision-making

With these capabilities in place, growing businesses can maintain operational control as volume and coordination demands increase.

If your organization is preparing for its next phase of growth, sign up for a QuickBooks Online Advanced free trial to see how it supports more connected inventory operations.