I'm saddened that this is the second thread in a few days where a customer paid in advance for a boutique item and has not received their product in a timely matter and even worse, not at all and had to fight to get a refund.
I have been in Monolith's situation before, and on a much larger scale. I'm not talking $500.00, I'm talking orders up to $75,000.00 on trucking equipment. The backstory isn't important, but I was juggling to finish units, pay suppliers, keep customers happy and keep the bank from literally crushing me financially.
The one thing I always did was talk to the customer. I was yelled at, threatened, I had orders canceled. There were some customers who believed in me, and other who never came back.
But they all got to say their peace, I always responded and above all, I was honest.
If i were to go back into that business again I could likely have half my customer base back in a month, simply because I never lied to them or avoided their calls.
I will say that I always took orders when they came in. It looks good to the bank when your WIP (Work In Process) has depth. I have no idea as to his process whether he has an inventory or buys as he goes. I would say that personally if I didn't have the items on the shelf to build what was ordered I would disclose that to the customer immediately and give them an estimate as to their wait time.
But I'm not the one under the microscope right now, and thankfully so. My vague point is that I sympathize with both the OP and with Monolith (and the others in similar threads), and that right now communication is crucial for the businesses in question. You don't have to air all the dirty details, but simple explanation and a little humility goes a long way.