Open to buy (OTB) is a merchandise planning system where a retailer operates with purchasing budget. In ForecastingApp we use a specific implementation of the OTB system.
In the OTB you operate with four basic assumptions: demand forecast, the forward cover, VAT (sales) tax rate, and current stock level.
Forward cover indicates the number of weeks the stock at any given time should last given the demand of the future. You need to have forward cover in the system before you can have a meaningful purchase budget. It is said, the rule of thumb of forward cover for a category should be lead time in weeks plus 50% of the lead time plus two weeks. Of course, there are more factors such as depth of assortment.
In the following figure you start the plan with no opening stock. You will need to populate the balance via intake for which you can set the desired margin percentage and the amount in retail value. You also need to set the forward cover weeks. Crucial step is to have sensible sales forecast.