Let's face it. Magento's order status system is very limited out of the box, and especially not very transparent for your customers. Fix this using the Advanced Order Status extension by XTENTO. Make your order processing more transparent for your customers, and for you, the store admin.
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This extension allows you to add custom order statuses and to dispatch email notifications using templates to customers whenever you change the order status in the Magento backend. Easily change the order status to any order status right from the Sales > Orders grid. With Magento's built-in order status system, an unlimited number of new statuses can be created right from the Magento backend, to set up more precise statuses in Magento and to let your customer know what's going on with their order.