Open-to-buy for furniture showrooms

The rep has a performance-fabric sectional program, a twelve-piece opening order, and free freight. It looks right for the floor. Before you sign, you need to know whether March’s buying budget already belongs to January’s POs.

Open-to-buy gives that question a number. It estimates how much additional stock the store can receive in a period while meeting its sales plan and ending inventory target. For the furniture buyer working with vendor invoices, a plan at cost is often the clearest starting point.

Choose one basis and keep it

A plan at retail measures inventory at selling prices. A plan at cost measures what the store pays for the goods. Both can work. Mixing retail sales with inventory at cost cannot.

The Retail Owners Institute explains the underlying relationship: expected sales plus desired ending inventory, less beginning inventory, determines required purchases. It allows units, retail dollars, or cost dollars, provided the basis stays consistent.

For a cost-based worksheet, use:

Additional open-to-buy = planned stock COGS + other planned inventory cost reductions + target ending stock at cost − beginning stock at cost − committed stock receipts at cost.

COGS means the cost of the stock expected to sell, not its ticket price. Committed receipts are purchases already expected to enter the stock program during that month. Keep the same treatment of freight and other landed costs throughout.

The result is remaining merchandise capacity. It does not prove the bank account can fund the purchase.

Do not add retail markdowns to a cost plan

A reduction in a sofa’s ticket price does not, by itself, reduce the dollars carried in a cost-based inventory worksheet. It changes the expected selling margin.

That distinction matters because familiar retail open-to-buy formulas include markdowns. Retail markdown dollars belong in a retail-value plan. They should not be dropped unchanged into a cost-value plan.

If the store expects a genuine reduction in the inventory’s carrying cost, that can appear as a separate cost reduction. Label it clearly and have the amount agree with the inventory records. Shrink, write-downs, and ordinary price promotions should not share an unexplained Markdown row.

Keep the promotion calendar beside the stock plan. A clearance event may change both the expected quantity sold and the margin earned, even when the cost assigned to each sold piece stays the same.

Work through March before accepting the opening order

Here is a worked example, with every amount at cost. The store expects $60,000 of stock COGS in March. It also expects a $4,000 reduction in inventory carrying cost, separate from ordinary retail discounts.

The arithmetic is $60,000 + $4,000 + $220,000 − $230,000 − $35,000 = $19,000.

If the $4,000 actually describes a retail promotion rather than a cost write-down, remove it from this equation. Remaining open-to-buy becomes $15,000. That small label changes the buying decision.

Against the first version, the rep’s $26,000 opening order exceeds March’s budget by $7,000. Against the second, it exceeds it by $11,000. Free freight does not close either gap. Ask for a smaller opening order, a staged shipment, or a later receipt month. Alternatively, identify an existing commitment that can actually be reduced or canceled. An intention to sell more is not a canceled PO.

Put receipts in the month they are expected

An October market order may require a deposit now and arrive in March. Its full expected stock cost belongs in March’s receipt plan. Its payment installments belong on their actual expected cash dates.

Do not count the same PO in every month simply because it remains open. Assign the outstanding quantity to the expected receipt month, splitting it when the vendor confirms separate shipments.

Then revise the allocation when dates move. An April container arriving in March can consume March’s available capacity even though nobody placed a new order.

Distinguish an estimate from a confirmed shipping commitment. A factory reopening date, for example, is not a promise that production has resumed at full speed. Ask the vendor about your production slot, remaining work, and expected dispatch. Put that order’s answer into the calendar.

The after-market purchasing plan turns show selections into dated commitments the office can review.

Keep customer orders outside the stock calculation

For a separately managed stock program, leave customer-specific purchases and their matching sales out of the stock open-to-buy calculation. Otherwise, a busy special-order month can make it appear that the showroom needs more speculative inventory.

Keep the special-order program visible on the cash calendar, however. Factory deposits, balances before shipping, freight, and duty may fall due before customers pay their remaining balances.

Customer deposits do not create additional stock-buying capacity. They arrive with orders to fulfill. The week-by-week cash flow of a custom furniture order helps identify the period the store must fund.

Mixed purchases need a deliberate split. If a vendor shipment includes a customer’s chair and three extra chairs for stock, only the three speculative units belong in the stock buying plan. Keep allocated costs consistent with that split.

Build the forecast from the floor you have

Start with the comparable month’s stock sales, then examine the conditions behind them. Last year’s clearance weekend may have moved discontinued beds at margins you do not intend to repeat.

Review each major category and vendor. A strong upholstery total can hide dining chairs that have occupied the back aisle for months. Look at stock sell-through, aged pieces, outstanding receipts, and the assortment the store intends to carry.

Set the ending inventory target from that assortment and expected demand. Carrying forward last year’s inventory balance without examining it can preserve last year’s buying mistake.

Market dates, vendor production breaks, and confirmed cost changes belong in the planning calendar. Avoid turning a general concern about future tariffs into a blanket instruction to buy early. Test the affected goods, effective date, expected landed cost, and cash impact for the particular shipment.

Use scheduled cost increases and buying decisions when a dated change affects your vendors.

Budget the samples that make the program possible

A mandatory gallery display is a purchase commitment even if the vendor calls it an investment in the relationship.

Show sample purchases on a separate line within the stock plan, with expected arrival, eventual replacement, and disposal timing. Include owned samples in the inventory balance. Do not hide them outside the budget because they are expected to generate custom orders.

Before accepting a new program, write down what leaves the floor to make room. A display can be commercially worthwhile and still arrive at the wrong time. The floor may welcome another shade of oatmeal; the loading bay may have a firmer opinion.

For market opportunities, reserve an explicit dollar amount inside the approved budget. There is no useful universal percentage for every showroom. Choose an amount the store can leave unspent without starving normal replenishment, then release it deliberately. The reserve is part of open-to-buy, not money added afterward.

Keep commitments visible in the purchasing records

OrderPilot supports standalone POs for stock and POs linked to customer orders; surplus quantities can remain available as stock. Review the outstanding quantities, expected dates, and stock/customer allocation when preparing the worksheet, and check vendor requirements before sending a PO. The open-to-buy calculation itself stays in your spreadsheet. Stock POs and customer POs explains how those purchases fit together.

Print one page for the monthly buying review

Use a column for each month and keep these rows in order:

Replace estimates with actual results each month, and review sooner when a large shipment or sales change affects the plan. Record who approved any over-budget purchase and which other assumption changed.

Bring the worksheet to the owner’s dashboard review. Leave market with a buying plan the office can fund and the floor can use.

Sources

1. Retail Owners Institute: Basics of open-to-buy plans.