Open-to-Buy Season Plan Calculator

What is open-to-buy and how is it calculated?

Open-to-buy is the money you still have available to spend on new inventory for a period, after everything already committed. Think of it as a checking account for stock: planned sales and reductions are money going out, opening inventory and goods already on order are your balance, and the desired closing inventory is the minimum balance you want to keep.

The formula has five terms: planned sales, plus planned reductions, plus planned ending inventory, minus beginning inventory, minus merchandise already on order. Everything is stated at retail, then converted to cost at the end.

The calculator's defaults run a spring season. April plans $61,000 of sales, $6,100 of reductions, opens at $183,000 and needs to end at $194,300, with $18,000 already on order. That's $60,400 of open-to-buy at retail, or $27,180 at cost — the number that actually goes on a purchase order.

Across the six months the plan produces $122,233.50 of open-to-buy at cost against $330,000 of planned sales.

The conversion matters and gets muddled constantly. Your POS, your sales reports and your inventory reports are all in retail dollars, so the plan is built at retail. Your vendors quote cost. Multiply retail by one minus the initial markup to cross over — at a 55% markup, $60,400 of retail buying power is $27,180 of purchase orders.

Why does the season need to be chained rather than calculated one month at a time?

Because each month's ending inventory is the next month's beginning inventory, and if you enter both by hand nothing forces them to agree.

Single-month calculators ask for beginning inventory and desired ending inventory as two independent numbers. That's fine for one month in isolation and quietly disastrous across a season, because you can plan to end March at $183,000 and then plan to start April at $190,000 without anything objecting. The plan drifts, and the drift shows up as a cash surprise in month five.

Proper merchandise planning removes that freedom. Planned beginning inventory is calculated as the stock-to-sales ratio times planned sales, and planned ending inventory simply equals next month's planned beginning inventory. You set the ratio, the plan sets the levels.

The calculator enforces that chain and proves it two ways. Each month's ending inventory equals the next month's beginning. And the whole season balances: opening inventory of $152,000 plus $271,630 of open-to-buy plus $98,000 already on order equals $330,000 of sales plus $41,630 of reductions plus $150,000 of closing inventory — $521,630 on both sides.

If your plan doesn't balance that way, it isn't a plan, it's six disconnected months.

One diagnostic falls out of the chain for free. The defaults open at $152,000 against a planned beginning of $142,800 — you're starting the season $9,200 heavy, which is exactly the sort of thing that goes unnoticed until you're chasing markdowns in June.

What are the two mistakes that wreck an open-to-buy plan?

Omitting reductions and omitting on-order. They pull in opposite directions and the calculator prices both.

Leaving out reductions makes you under-buy. When you mark an item down it loses retail value, so to hold your inventory target you have to buy additional goods to replace the value the markdown destroyed. Drop reductions from the calculation and the season's open-to-buy falls from $122,234 to $103,500 at cost — $18,734 of under-buying. In practice that shows up as running thin on best-sellers in month four and paying air freight to chase them.

Leaving out on-order makes you over-buy. Goods already ordered but not yet delivered are committed money. Ignore them and the plan reads $166,334 at cost instead of $122,234 — $44,100 of over-buying, which is the same merchandise ordered twice.

Of the two, the on-order error is larger here and it's also the easier one to make, because on-order lives in a purchase order folder rather than in the POS. Pull it by delivery month, not by order date.

A third point worth being precise about: reductions are not the same thing as markdowns. Reductions include markdowns, employee discounts and shrinkage. The defaults carry a 6% to 22% markdown rate rising into clearance, plus 0.8% employee discount and 1.2% shrink — 12.62% of sales in total. A plan that counts only the markdown line understates reductions by about two points of sales every month.

How do I know whether the plan is any good?

Four diagnostics, and they'll disagree with each other in useful ways.

• Stock-to-sales ratio sets your inventory level. Two to three times is typical for apparel; the defaults run 2.9 to 3.4, peaking before the selling months.
• Turnover is planned sales over average inventory — 1.94 across six months here, or roughly 3.9 annualised.
• Weeks of supply is the same idea stated differently: 13.4 weeks of stock on hand at the planned sales rate.
• GMROI is the one that ties inventory to profit — gross margin dollars per dollar of inventory at cost. The defaults produce 2.13 against a common target of 3.0. That's the signal to act on: the plan is carrying more inventory than the margin supports, which is consistent with opening $9,200 heavy and running a 12.6% reduction rate.

Watch the markup erosion too. Initial markup is 55%, but after reductions the maintained markup is 49.32% — 5.68 points of margin given away to markdowns, employee discounts and shrink. Buyers plan against initial markup and get paid on maintained markup, and the gap between them is the whole reason reductions belong in the plan rather than as a surprise at season end.

Can I recalculate open-to-buy partway through a month?

Yes, and you should — the month-end number goes stale the moment the month starts.

The midmonth calculation replaces planned figures with what's actually left: planned sales less sales taken to date, plus planned reductions less reductions taken to date, plus planned ending inventory, minus stock on hand right now.

The calculator's defaults sit at mid-April. Planned sales of $61,000 less $32,000 taken leaves $29,000 to come. Planned reductions of $6,100 less $2,800 taken leaves $3,300. Against $176,000 of current stock and a $194,300 ending target, midmonth open-to-buy is $50,600 at retail, $22,770 at cost.

Compare that to the $60,400 full-month figure and you can see the month is running roughly to plan — you've consumed about a sixth of the budget in half the month, which is a slower burn than it looks because inventory arrived.

Two cautions on the midmonth number. It uses current stock on hand, which already reflects deliveries received, so don't subtract on-order again unless you're specifically netting goods still to arrive this month — double-counting there is easy. And the shorter the remaining window, the more sensitive the answer is to a single large delivery, so treat late-month recalculations as directional rather than precise.

Run it monthly as a plan and weekly as a check. Things move faster than a monthly cadence can see.