Listing Mirror has the capability to cancel eBay orders! So when you need to cancel an eBay order, do so within Listing Mirror. Canceling an order directly on the marketplace will cause LM to add the QTY from that order back to inventory. When you cancel an eBay order direct in LM, the QTY for that order will NOT be added back to inventory.
Go to the Order Details page for the order you need to cancel.
Select Cancel order on market from the Action drop-down menu.
Note, when canceling thru LM, this does not immediately cancel the eBay order. Instead, it sends a notification to the buyer of the order to "accept the cancellation." They do this from their eBay seller account. Once they have accepted the cancellation, the order will show as cancelled in your seller account!