"Open-to-buy" is slang for an inventory buying budget. It really should be called "open-to-receive." It describes the maximum amount of merchandise to receive in a given month to hit the targeted ending inventory for that month, based on the sales, margins, and turns.
Entering your purchase orders in the Inventory on Order column for the months that you expect to receive the merchandise will immediately update your remaining Open-to-Buy numbers.
Monthly! Looking ahead to the upcoming 12 months. It won't take long for just the handful of entries. Sales and margins can go in quickly, reflecting your current business trends. Be sure to adjust the Beginning Inventory value for the first of that month, and include the Inventory on Order for the months in which you expect to receive it.
Because inventory turnover is an annual calculation, to get an accurate Open-to-Buy, it is important to enter planned sales and margins for all 12 months of your planning period. (Remember, it can start with any month you choose.) Many retailers start with using Last Year's monthly sales and margins, then adjusting them.
Without a doubt, the most significant numbers are "Targeted ENDING INVENTORY @Cost". Consider, "Are those numbers reasonable?" If they appear too low, then lower the turnover rate gradually. Or, if the Targeted Ending Inventory looks higher than you need, gradually raise the turnover rate. This tweaking - adding your judgment by adjusting the turns - is essential to proper use of this calculator.
Most of “the numbers” you might want to save – that is, your monthly Buying Plans – are generated by the Open-to-Buy Calculator, based on the few entries you input (planned sales and margins, etc.) The best way to "save" those, once you have developed a plan you like, is to just print out a hard copy for reference. Do that by using the “PRINT ALL“ button. Or, depending on your computer and/or browser, you may be able to simply email a pdf copy of the plan.
These online Open-to-Buy calculators work "in the browser." That is, your entries will be retained in the browser you use for input (e.g., Firefox, Chrome, Safari, Edge), subject to your settings for clearing its history.
No more worries if you are interrupted while working with it. When you resume, use the same browser and device, and your plans will be there! (Even if it is a few days later, so long as you have not cleared the history in that browser.)
Inventory management (Open-to-Buy) and cash flow are 2 very separate issues. They are not to be intermingled. In simplest terms, Open-to-Buy controls how much inventory to have on hand at any given time; Cash flow is used to help manage when you pay for that merchandise. For example: you bring in X amount of merchandise in September, and get dating to pay for it in January. Open-to-Buy indicates approximately how much to bring in in September; cash flow determines whether you'll have enough cash in January to pay for that merchandise.
You can use the SPEEDY Open-to-Buy Calculator many ways: your entire operation; individual stores; individual departments; individual vendors; etcetera. All you need are the numbers for the handful of entries for wharever category you want to analyze. And remember, close counts! Use estimates. Don't get bogged down in small details!
No, enter Planned Sales @Retail. The calculator then uses the Gross Margin % each month to complete the calculations.
That depends. You can start with what your turns have been. Or, use the Benchmarks available at The Retail Owners Institute – RetailOwner.com – to see what is average for your specific retail segment. Then, apply your judgment as you review the Open-to-Buy plan. See the effects of raising or lowering the turns, and/or adjusting planned sales or margins. See and compare for yourself, in moments, "What would happen if I...?"
Use it whenever you are making inventory purchasing decisions. For example: Before placing orders with vendors; Whenever cash flow is affected by excess inventory; Whenever you need to adjust your sales plans or margin expectations.
Round all entries to the thousands. Examples: enter $42,385.22 as 42.4; enter $5,787.92 as 5.8; enter $385.33 as 0.4. This makes it much easier to read the numbers and see "the Big Picture".
Of course, you can, but it is decidedly not recommended! To do so may greatly alter the output for the upcoming 2 or 3 months. Our Open-to-Buy Calculators were designed and work best solely for future planning. They are not accounting tools.
Good question! Here are some of the Most Frequent Answers. For retailers, inventory usually represents 60%–85% of all of their assets. Moreover, the higher inventory is, the lower cash on hand, and/or added debt. In addition, studies have shown that about 80% of all retailers are over-inventoried some or all of the time. It's a major cause of retail failures.