The core rule with backorders is simple. Don’t record what hasn’t happened yet. Inventory only hits your books when you receive it. Revenue only gets recorded when you ship to the customer. Backorders exist in a tracking system, not on your balance sheet.

When you order from a vendor and they can only ship part of your order, record only what you received. The materials sitting in your warehouse count as inventory. The items still on backorder don’t. If you prepaid for the full order, the portion covering unshipped items stays as a prepaid expense or deposit until those goods arrive. Once they show up, you move that amount into inventory.

Partial shipments require attention to invoices. Vendors sometimes send one invoice for the full order even when they ship in batches. You need to match what you pay to what you actually received. Paying an invoice in full before receiving all the items creates a mismatch between your records and reality. Track what’s outstanding so you know what you’re still owed.

On the customer side, if someone orders from you and items are backordered, hold off on recording revenue for those items. You might take a deposit or prepayment, which goes into a liability account like customer deposits. It only moves to revenue when you ship the product. Recording a sale before fulfillment overstates your income and understates your obligations.

Keep a separate list or report for open backorders. Most inventory tracking systems and accounting software let you flag orders as partially fulfilled or on backorder. Use these features. A simple spreadsheet works too if your volume is low. The goal is visibility into what’s pending so nothing falls through the cracks.

Reconcile your backorder list weekly. Compare it against vendor confirmations and customer communications. Things change. Expected ship dates slip. Orders get canceled. Quantities get adjusted. Your tracking needs to reflect current reality, not what was true three weeks ago.

Watch for invoicing errors when backorders finally ship. Vendors may accidentally bill you twice for the same items or apply incorrect pricing on delayed shipments. If you’re not tracking what was already paid versus what’s newly owed, these errors slip through and cost you money.

For businesses with significant backorder activity, consider running an aging report on open orders. This shows how long items have been waiting and helps you follow up on stale backorders that might indicate a problem with a vendor or a customer order that needs attention.

If your books feel messy because orders keep arriving in pieces, the issue is usually tracking rather than accounting complexity. A Findlay bookkeeper can help you set up systems that keep partial shipments organized without creating extra work every time something arrives incomplete.