here's why Open To Buy is the key to your business
Managing inventory properly can mean the difference between success or failure of your retail business. Too little will cause sales to be missed, while having too much will cause cash issues and increased debt to vendors, which could impede your ability to obtain future inventory. Having an Open-To-Buy strategy and “tool” to manage every aspect of purchases and know exactly what category and how much based on historical sales, is imperative to being a successful retailer. There are integrative aspects of an OTB that are intertwined and essential to function effectively. An elimination of any of these will provide an opportunity for misinformation and inaccuracies that will result in poor planning and ultimately incorrect decisions being made.
cash flow is vital
As a product-based retailer, the largest outlay of cash for your business is purchasing inventory to sell your customers. And with cash being the #1 asset for a company to operate successfully, the OTB is a critical aspect of your overall cash flow planning. Without proper management of inventory purchases the businesses’ cash flow will be negatively impacted, proper amounts of inventory will not be available to meet projected sales, inventory may turn too fast or slow resulting in missed sales, reduced cash or increases accounts payable.
key elements
An OTB is designed to manage how much inventory is purchased based on your forecasted sales, cost of goods sold, annual inventory turns, and the establishment of a base inventory amount based on the previously mentioned items. These calculations are critical to successfully managing inventory purchases and can make the difference between success and failure of your business. Don't worry, if this seems overwhelming, we're going to make it easy and turnkey for you.
product category management
Another critical trait of a well-managed Open-To-Buy strategy is the management of product categories. It’s imperative that inventory dollars are being placed in the categories in the % amount of what is being sold. This will allow for the proper amount of inventory to be purchased and ensure the maximization of capital invested. This % is generally available on the store’s Point of sale (POS) system and signifies what customers are buying relative to overall sales. The first step is determining how many categories generate 85% of the annual revenue. This will signify the key areas generating revenue and supporting the business. Generally, anything less that 5% of overall sales is not considered a category and would be a part of miscellaneous category. Category success is achieved when inventory, purchases and sales for a category are aligned, i.e., equal the same %.
value of a well-managed otb
A well-managed Open-To-Buy will allow the retailer to know at a glance how much inventory remains to be purchased per month, a cumulative total for each subsequent month, what remains for the rest of the year and what has been spent in each category relative to the historical %. This will adjust as each month is closed and actual sales and COGS are recognized. As sales fluctuate so will your OTB. And along with this so will the base inventory.
the OPENTOBUY.CO system
“The Open-To-Buy” system was developed, enhanced and tested over the past seven years to provide retailers with the power to successfully manage their inventory purchases easily and affordably. It automatically tracks, calculates and updates all areas of the OTB as information is entered to keep you up to date and knowing exactly where you stand with each category, every month and for the year. It also tracks purchases by vendor to see where your dollars are being spent. It can be adjusted at any time and as actual sales and COGS (Cost of Goods Sold) are inputted following the closing of a month, the template automatically updates everything. Thus, you always know exactly where you stand with the OpenToBuy.co system.
cash flow is vital
As a product-based retailer, the largest outlay of cash for your business is purchasing inventory to sell your customers. And with cash being the #1 asset for a company to operate successfully, the OTB is a critical aspect of your overall cash flow planning. Without proper management of inventory purchases the businesses’ cash flow will be negatively impacted, proper amounts of inventory will not be available to meet projected sales, inventory may turn too fast or slow resulting in missed sales, reduced cash or increases accounts payable.
key elements
An OTB is designed to manage how much inventory is purchased based on your forecasted sales, cost of goods sold, annual inventory turns, and the establishment of a base inventory amount based on the previously mentioned items. These calculations are critical to successfully managing inventory purchases and can make the difference between success and failure of your business. Don't worry, if this seems overwhelming, we're going to make it easy and turnkey for you.
product category management
Another critical trait of a well-managed Open-To-Buy strategy is the management of product categories. It’s imperative that inventory dollars are being placed in the categories in the % amount of what is being sold. This will allow for the proper amount of inventory to be purchased and ensure the maximization of capital invested. This % is generally available on the store’s Point of sale (POS) system and signifies what customers are buying relative to overall sales. The first step is determining how many categories generate 85% of the annual revenue. This will signify the key areas generating revenue and supporting the business. Generally, anything less that 5% of overall sales is not considered a category and would be a part of miscellaneous category. Category success is achieved when inventory, purchases and sales for a category are aligned, i.e., equal the same %.
value of a well-managed otb
A well-managed Open-To-Buy will allow the retailer to know at a glance how much inventory remains to be purchased per month, a cumulative total for each subsequent month, what remains for the rest of the year and what has been spent in each category relative to the historical %. This will adjust as each month is closed and actual sales and COGS are recognized. As sales fluctuate so will your OTB. And along with this so will the base inventory.
the OPENTOBUY.CO system
“The Open-To-Buy” system was developed, enhanced and tested over the past seven years to provide retailers with the power to successfully manage their inventory purchases easily and affordably. It automatically tracks, calculates and updates all areas of the OTB as information is entered to keep you up to date and knowing exactly where you stand with each category, every month and for the year. It also tracks purchases by vendor to see where your dollars are being spent. It can be adjusted at any time and as actual sales and COGS (Cost of Goods Sold) are inputted following the closing of a month, the template automatically updates everything. Thus, you always know exactly where you stand with the OpenToBuy.co system.
