The inside setback of a sheet metal bend is the distance from the apex of the inside mold lines to the tangent point of the inside radius. When the sheet metal is bent the inside radius pulls the edge of the material away from the apex of the bend. The inside setback is a function of geometry and does not change with a metal’s k factor the way bend allowance and bend deduction do.
The inside setback is only considered in angles up to about 170° because as the angle approaches a 180° the values of the outside and inside setback approach infinity. This will throw off any bend allowance or bend deduction formulas you are trying to use to calculate your flat pattern.
Calculating the Outside Setback (OSSB) you will need the Material Thickness (MT), Bend Angle (B<) and the Inside Radius (IR).
As you can see below ignoring the outside setback when designing two mating flanges you will end up with interferences or poorly finished edges. On the left is the assumed design ignoring the outside and inside setbacks. On the left you can see the interference left from ignoring the inside setback, on the right you can see an unfavorable overhang due to ignoring the outside setback.
When the setbacks are properly accounted for the finished design is superior in both fit and finish. The lack of interference means that the parts will fit together in a predictable fashion while the lack of an overhang means a smoother edge which is safer to handle and will look more professional.