Back Orders are automatically created when a sales order is created and your stock levels are insufficient. The IMS will split the order into two orders with sequential numbers. One order will be made pending and the second order will be listed as Back Order in the order process screen. For this to work, Over-selling has to be enabled which is done through Settings ⇒ Sales.
Over-selling from the order screen
At order taking the quantity input field will turn red when stock levels are insufficient. Hover over the quantity input field with your mouse to see the actual available stock.
The IMS automatically processes Back Orders when stock levels are being adjusted through the process of purchasing, at order cancellation or with manual stock level adjustments. For example, Back Orders are made pending once inventory stock becomes available after an order has been cancelled or when a purchase order shipment is checked into your inventory.
The Back Orders section available through Sales ⇒ Process Orders will appear automatically once back-orders are created.