Backlogs, such as unfulfilled orders, can be tracked to estimate a company’s future earnings and demand for products. High backlogs indicate demand, while excess inventory suggests a slower economy. Individual workers can also develop backlogs, indicating inefficiency or being overwhelmed.
A delay is an accumulation of work that has not yet been completed. There are ways that the backlog can be tracked to gather data about a company’s projected future. Potential investors are often interested to know about a company’s backlog on its books, as this information can be used to make estimates about future earnings, as it reflects work that has not yet been completed and will generate revenue once it is finished. .
An example of a backlog is unfulfilled orders. This type of backlog is very easy to track because a business can simply keep records of all incoming orders and note which ones have not been completed. A high backlog indicates that there is demand for a particular product or service and that the company has assured buyers of at least the amount of material in stock.
For example, if a car company has a backlog of 100,000 orders, that means 100,000 buyers are aligned with the cars it produces, which means it can project these as potential sales and profits. On the other hand, if the car company is overloaded with cars, it means there is less demand and the company is sitting on unsold units. That suggests the company’s future isn’t as bright, because it can’t even find buyers for the products it already owns.
Individual workers can also develop a backlog of work that needs to be completed. This can be integrated into employee reviews; if someone continually accumulates uncompleted work, it suggests that this employee is not able to complete tasks efficiently or is overwhelmed with too much work. Being able to balance items in a pile of tasks is also important for employees as they need to determine which work should move to the front of the queue and which items can wait.
Companies can report information about their order book for the benefit of investors who want an idea of projected sales in the coming months or years. This information is also frequently reported in the media because it can be a general topic of interest used to provide information about economic conditions. High backorder volumes at several companies suggest that the economy is robust and companies are getting lots of orders for their products, while high rates of excess inventory indicate that the economy is slower and people are reluctant to buy.
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