How Open-to-Buy Planning Works
Open-to-buy planning starts with a target for ending inventory and forecasts for sales and markdowns. The business then considers inventory already available and merchandise that has already been ordered. The remaining amount represents purchasing capacity for the period.
Planning is normally performed by week, month, season, department, category, or location. Actual sales and inventory results are compared with the plan, allowing purchasing decisions to be adjusted as business conditions change.
- Planned sales: Expected merchandise revenue for the planning period.
- Planned markdowns: Expected reductions in inventory value or selling price.
- Ending inventory: Stock level the business wants to hold at the end of the period.
- On-order inventory: Merchandise already committed through outstanding purchase orders.
Open-to-Buy Formula and Example
A common calculation is: Open-to-Buy = Planned Sales + Planned Markdown + Planned Ending Inventory − Beginning Inventory − On-Order Inventory.
For example, assume a retailer has planned sales of $120,000, planned markdowns of $10,000, planned ending inventory of $80,000, beginning inventory of $100,000, and on-order inventory of $40,000.
The calculation is: $120,000 + $10,000 + $80,000 − $100,000 − $40,000 = $70,000. The resulting $70,000 represents the merchandise purchasing capacity available under those planning assumptions.
Open-to-Buy and Procurement Decisions
Open-to-buy planning turns merchandise forecasts into purchasing boundaries. A buyer can compare proposed sourcing commitments against remaining purchasing capacity before approving additional orders. This makes the plan useful alongside procurement workflows that coordinate requisitions, sourcing, approvals, and supplier commitments.
For example, a retailer with $70,000 of available open-to-buy may evaluate several proposed purchase orders before committing additional inventory. A purchase order should be considered alongside expected sales, existing commitments, supplier lead times, and the inventory target rather than viewed as an isolated transaction.
Open-to-buy planning can also support Predictive Procurement Automation: The Future of AI Spend by connecting purchasing activity with expected demand, spend visibility, and financial planning.
Open-to-Buy Planning in ERP Systems
ERP systems can connect open-to-buy plans with inventory records, purchasing transactions, sales data, supplier information, and financial workflows. This gives planners a consistent basis for monitoring commitments and updating purchasing capacity as actual results change.
ERP integration is particularly relevant when organizations evaluate When to Move from Free ERP to Paid, because expanding merchandise planning may require stronger integration between inventory, purchasing, financial workflows, and reporting.
For omnichannel retailers, eCommerce ERP Software: Complete 2025 Guide to ERP Webshop is also relevant when evaluating how an ERP connects online sales, inventory planning, order management, and financial information.
Open-to-Buy Planning Across Finance and Operations
Open-to-buy planning sits between merchandising, procurement, inventory management, and finance. It helps translate expected demand into controlled purchasing activity while giving finance teams visibility into inventory commitments and working-capital requirements.
The approach also complements the Buy Side Process, which covers purchasing-oriented business workflows from sourcing and buying through related financial and operational activities. Separating purchasing capacity from already committed inventory helps businesses distinguish future buying opportunities from existing obligations.
Related commercial workflows can extend into Buy Side Outreach when supplier or purchasing communications need to support payment-related coordination and transaction follow-up. Promotional purchasing may also require awareness of Buy One Get One Tax Rules where applicable, because promotional structures can affect transaction values, tax treatment, and financial records.
Using Open-to-Buy Planning Effectively
Effective planning requires regular comparison between budgeted and actual sales, inventory, markdowns, and purchase commitments. Businesses can improve decision quality by maintaining consistent planning periods, updating forecasts as demand changes, and separating committed inventory from future purchasing capacity.
Open-to-buy planning should also connect with accounts payable because inventory commitments eventually create supplier invoices and payment obligations. AP Automation Software can support invoice processing and payment planning, helping finance teams connect purchasing commitments with downstream accounts payable activity.
- Review open-to-buy balances at the same frequency as merchandise planning.
- Reconcile outstanding purchase orders with actual supplier commitments.
- Adjust forecasts when sales or inventory materially differ from plan.
- Coordinate buying decisions with cash-flow and working-capital objectives.
- Analyze open-to-buy by category or location when inventory requirements differ significantly.
Summary
Open-to-Buy Planning determines the purchasing capacity remaining after accounting for planned sales, markdowns, inventory targets, beginning inventory, and existing orders. By connecting merchandise forecasts with procurement, ERP, and financial workflows, it helps businesses control inventory commitments while supporting disciplined purchasing and cash-flow decisions.