Backorder
Definition
An order for goods that cannot be filled immediately because they are out of stock, but which the customer is willing to wait for. Managing backorders well preserves sales that would otherwise be lost to stockouts.
Related Terms in Purchasing & Inventory
Goods Receipt Note (GRN)
A document confirming that goods ordered via a purchase order have been physically received and inspected. Part of 3-way matching (PO → GRN → Invoice) to prevent overpayment. HelloBooks has full GRN with validation rules.
Three-Way Matching
A verification process that matches the purchase order, goods receipt note, and vendor invoice to ensure you only pay for what was ordered and received at the agreed price. Prevents fraud and errors.
FIFO (First In, First Out)
An inventory valuation method where the oldest stock is sold first. During inflation, FIFO results in lower COGS and higher reported profits compared to LIFO.
Fixed vs variable costs
Fixed costs stay the same in total regardless of how much a business produces or sells within a relevant range, such as rent, insurance and salaried wages. Variable costs change in total in direct proportion to activity, such as raw materials, packaging and sales commissions. Some costs, called mixed or semi-variable costs, contain both elements.
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