How do I check a restaurant equipment distributor’s open orders and backorders?

Open orders are the future work of the business, and also its obligations. Start by asking for the full list and checking that each line has a customer, a price, a deposit status and a supplier order behind it. An order with no supplier confirmation means a promise that might not be kept.

Then look at the ages. Orders waiting a long time may point to supplier delays, discontinued models or customers who have gone cold. Ask how customers are told about delays and how many have cancelled. Check what happens to deposits when an order is cancelled, and where the deposit money is held.

Next, think about the handover. If you take over the business, you will usually be the one customers call about late deliveries. Agree in the sale terms how open orders, deposits and supplier commitments are treated at closing. Check stock that was bought in for a specific order and has no buyer now. Ask your lawyer how order commitments and deposits should be handled, and your accountant how to record them. Keep the list in step with the inventory so that the numbers agree.

Key takeaways

• Match every open order to a supplier confirmation and a deposit record.
• Look at order ages and ask how delays and cancellations are handled.
• Agree in writing how deposits and commitments pass at closing.
• Check whether any stock was bought for a specific order that is now cancelled, and who carries that cost.