You can buy as much as you expect to sell in the season, plus the stock you want left at the end, minus what you already have. That is your buying budget. Whether that budget fits only becomes clear when you set the payments to the supplier per month against your expected turnover.
In fashion there is often a gap in between. You order months ahead and pay on delivery, while the turnover only comes in later. A monthly cash plan shows whether you can bridge that gap yourself.
In short
- Your buying budget is the expected sales at purchase price, plus the desired stock at the end of the season, minus the stock at the start and what has already been ordered.
- Put the payment dates of the orders into a monthly cash plan. If cash drops below zero in any month, the order is too large or the payment has to come later.
- Keep part of the budget back for reorders. Research at a skiwear producer showed that adjusting to early sales can raise profit considerably.
In this article
- Why does seasonal buying in particular squeeze your cash?
- How does a clothing shop's turnover run over the year?
- How do you calculate your buying budget for a season?
- How do you test the budget against your cash?
- Should you order the whole budget in advance?
- What does your stock turnover tell you?
- What do you do if cash still gets too tight?
Why does seasonal buying in particular squeeze your cash?
Because you pay before you sell. You often choose the collection six months ahead, and the supplier wants to be paid around delivery. The turnover from that collection comes in over the following months. In the meantime your money is tied up in the stock.
Researchers call this the core problem of fashion. Long lead times and a short selling season force businesses to commit most of the production before they know what will sell. That leads to losses from items selling out and from stock that no longer sells (Fisher & Raman, 1996).
For a shop with 1 to 25 people that means: an order that is too large costs money twice. First because cash gets too low before the season. Then because what is left has to be marked down, or valued lower on the balance sheet.
How does a clothing shop's turnover run over the year?
With a dip at the start of the year and a peak in the autumn. CBS, Statistics Netherlands, measures the monthly turnover of shops in clothing and in shoes and leather goods as an index. In 2025 the index for clothing shops was lowest in February, 99.7, and highest in October, 157.6. So turnover in February was about a third lower than in October (CBS StatLine, table 85828NED).
This is a national average of all clothing shops, large and small. Your own pattern may be different, for example in a tourist town or with a large online shop. So use your own till figures per month for the past two years. The CBS pattern is a good check: if you differ strongly, find out why.
How do you calculate your buying budget for a season?
With four figures. Start with the turnover you expect in the season, per product group, and convert it to purchase price. Add the stock you want to have at the end of the season. Deduct the stock you already have at the start, and the orders already placed. What remains is the room to buy. In the trade this is often called open to buy.
For the expected turnover, use the figures for the same season last year, per product group. Look not only at what you sold, but also at what price. A coat that went in the sale does not count as a coat you will sell at full price next year.
How do you test the budget against your cash?
With a monthly cash plan. List for each month: the money in the bank at the start, the expected receipts from the till, and the outgoings such as rent, wages and payments to suppliers. What is left at the end of the month is the start of the next month.
In the example below a shop has € 300,000 turnover a year excluding VAT, spread over the months like the CBS pattern for 2025. The fixed costs are € 12,000 a month, and on 1 August there is € 30,000 in the bank. The winter collection of € 80,000 is delivered in August, September and October.
If the shop pays on delivery, the account is overdrawn in September and October, by up to € 8,500 in October. If the shop may pay 60 days after delivery, cash stays positive throughout the autumn. It is the same order and the same turnover. Only the moment of payment is different.
In your own plan, also take VAT into account. On the purchase invoice you pay VAT to the supplier, which you only offset through your VAT return. And on your turnover you collect VAT that you pay over later. Put both in the month in which the money actually leaves or reaches your account.
Should you order the whole budget in advance?
Preferably not. Keep part back to reorder what sells well. Fisher and Raman studied a large skiwear producer. By shortening lead times, the company could plan a larger share of production after the first sales figures. Compared with the way of working at that time, costs fell so much that profit rose by 60% (Fisher & Raman, 1996).
That research was about a producer, not a shop, and a shop cannot always influence lead times. The principle does apply: what you only order once you know the first sales, you will have to mark down less often. So ask your suppliers which part of the collection you can still reorder later, and how quickly it will be delivered.
An order you hold back also reduces the dip in your cash. If the shop in the example first orders 80% of the budget, € 64,000 with the same spread, and only pays the remaining € 16,000 in November, cash stays above zero every month. The lowest point is then € 5,400 at the end of November.
What does your stock turnover tell you?
How often you sell your stock in a year. You divide the purchase value of what you sold in a year by the average stock at purchase price. If you sell € 150,000 at purchase value and hold € 50,000 of stock on average, the turnover rate is 3. The higher it is, the shorter your money is tied up in stock.
Do not simply compare that figure with other shops. Gaur, Fisher and Raman examined the figures of 311 listed retail companies in the United States from 1987 to 2000. Stock turnover varied widely between companies and over the years. A large part of that variation was related to gross margin, investment in stores and equipment, and to how sales turned out compared with expectations (Gaur, Fisher & Raman, 2005).
For your own business the lesson is: compare your stock turnover mainly with yourself, per season and per product group. If it falls while turnover stays the same, you are buying more than you sell. Then the next buying budget is the place to adjust.
What do you do if cash still gets too tight?
First on the buying side. Make the pre-order smaller, or ask the supplier to spread the delivery or for a longer payment term. Those are agreements you make before you sign, not once the invoice has arrived.
After that you can look at financing, such as an overdraft facility with the bank. That is a credit line that lets you go overdrawn temporarily. A bank may then ask for a cash plan like the one above. It shows how large the shortfall is and how long it lasts.
Finally, look at what is still there. Stock from last season is money standing still. For tax purposes you may value out-of-fashion clothing lower, with fixed maximum percentages based on the time since delivery (Annual Profit Decree, Government Gazette 2023, 4100, part 2.2). That gives a lower profit on paper, but no money in the bank. Only selling does that.
Sources
- CBS, StatLine, Trade and services, turnover and production changes, index 2021=100 (table 85828NED), branches 4771 Clothing shops and 4772 Shoe and leather goods shops, months of 2025, accessed 28 October 2026. cbs.nl
- Fisher, M. & Raman, A. (1996). Reducing the cost of demand uncertainty through accurate response to early sales. Operations Research, 44(1), 87-99. doi.org
- Gaur, V., Fisher, M.L. & Raman, A. (2005). An econometric analysis of inventory turnover performance in retail services. Management Science, 51(2), 181-194. doi.org
- State Secretary for Finance, Annual Profit Decree (Besluit Jaarwinst), 25 January 2023, no. 2022-11246, Government Gazette 2023, 4100, part 2.2. officielebekendmakingen.nl