Untracked waste is a direct drain on cash flow. For many food SMEs, profit disappears not because of low sales, but because of a failure to account for the gap between raw materials and finished goods.
When a founder prices a product based on the purchase cost of raw materials without calculating the actual yield, they often underprice their goods. This creates a scenario where a business can increase its volume of sales while simultaneously reducing its actual profit.
Calculating yield and waste
Yield is the percentage of a raw material that remains as a usable product after processing. Waste is the portion discarded during the production process.
To calculate yield, divide the weight of the finished product by the weight of the raw material used, then multiply by 100.
Yield Formula: (Finished Weight ÷ Raw Weight) x 100 = Yield %
Waste is the inverse of yield. To find the waste percentage, subtract the yield percentage from 100, or divide the weight of the waste by the raw weight.
Waste Formula: (Waste Weight ÷ Raw Weight) x 100 = Waste %
Practical SME application
Consider a small-scale cassava processing business in Nigeria producing garri. The owner buys 1,000kg of raw cassava tubers.
After peeling, washing, grating, pressing, and frying, the final output of garri is 250kg.
The yield calculation is (250kg ÷ 1,000kg) x 100, resulting in a 25% yield. The waste is 75%.
If the owner only accounts for the cost of the 250kg of finished garri but ignores the cost of the 750kg of discarded peels and moisture loss, the pricing will be inaccurate.
The cost of the entire 1,000kg of raw cassava must be absorbed by the 250kg of final product to determine the true cost per unit.
Common mistakes in production tracking
Many managers rely on theoretical yields provided by equipment manufacturers or cookbooks. These figures rarely account for local raw material quality or staff inefficiency.
Another common error is failing to weigh materials at every stage. Waste happens in increments. Peeling loss, processing spillages, and evaporation all contribute to the final number.
Some owners ignore “invisible waste,” such as product that sticks to machinery or remains in mixing bowls. Over a month of production, these small losses can represent a significant percentage of monthly revenue.
Impact on cash flow and resilience
Accurate yield data allows a business to optimize its procurement. If yield drops suddenly, it indicates a problem with the quality of raw materials or a failure in the production process.
Correcting a 5% waste leak can immediately improve gross margins without requiring a price increase for customers. This directly increases the cash available for scaling or absorbing market shocks.
From a compliance standpoint, tracking waste is essential for businesses moving toward formal certifications. Accurate records prove operational efficiency to potential investors or lenders.
SME owners should begin by conducting a “waste audit” this week. Weigh every raw material entering the production line and every finished unit exiting it to establish a baseline yield for every product.
