Open-to-Buy Calculator (OTB)
Riyals available to spend on new inventory in a period.
Prevents overbuying and stockouts. The discipline that keeps cash and assortment in balance.
- Formula
- Planned Sales + Planned Markdowns + Planned EOM − Planned BOM − On Order
Worked example
- Planned sales
- 50,000 SAR
- Planned markdowns
- 5,000 SAR
- Planned EOM stock
- 80,000 SAR
- Planned BOM stock
- 75,000 SAR
- On order
- 10,000 SAR
- Result
- SAR 50,000
How to read it
Open-to-buy is the money you have left to commit this period without breaking the stock plan. A result of SAR 50,000 means you can place that much more before you are overbought. A negative figure means you are already committed beyond the plan, and every further order makes the markdown worse rather than the assortment better.
Common mistake
Leaving goods already on order out of the calculation. On-order is the single biggest reason a buyer feels they have room when they do not — the stock is bought, it simply has not landed. The second trap is mixing cost and retail values inside one calculation. Pick a basis and keep every input on it, or the answer means nothing.
What to do about it
If open-to-buy is negative, the cheapest fix is the one furthest upstream. Cancel or push back a delivery before you plan a markdown — moving an order costs you a conversation with a supplier, a late markdown costs margin on every unit. And read the markdown line carefully: raising planned markdowns increases open-to-buy, because clearing stock makes room to buy. That is correct arithmetic, not extra budget. If it is not a markdown you genuinely intend to take, you have moved the overbuy into next season rather than solving it.
Questions
Should open-to-buy be calculated at cost or at retail?
Either, as long as every input uses the same basis. The formula is usually worked at retail, because planned sales and markdowns are retail values, then converted to cost for the purchase order. The error is mixing the two inside one calculation.
How often should it be recalculated?
Monthly at minimum, and again before any significant commitment. Open-to-buy is a position rather than a report — it changes every time stock lands, sells or is marked down.
What does a negative open-to-buy mean?
You are overbought against the plan. Nothing has broken yet, but every additional order now has to be funded by either higher sales than planned or deeper markdowns later.