Understanding percentages

As a farmer, you always need to work with figures and percentages are an important part of your calculations. The good news is that they’re really quite easy to understand.

 

We pay a percentage of our income to the taxman. We add a percentage profit when we sell produce. We need to harvest sunflower when the heads are 80% brown. What do these words mean, and how are they used in farming?  Anything that is complete or full is 100%. Think of a circle: it represents 100%. If you divide the circle into four equal parts, each part (or quarter) is 25% of the whole (because 25 x 4 = 100).

If you own a half of something, you own 50% (because 50 + 50 = 100).

Every calculator has a percentage key (%). Here’s how to use it. Let’s say you’re buying a tractor for R130 000 and want to calculate the VAT (value-added tax). Enter 130000 (no spaces), then press plus (+), 14 and %. Your answer should be R18 200. That’s the amount of VAT you’ll have to pay over and above the price of R130 000. After this, simply press the equals key (=) and you’ll get the total price including VAT: R148 200.

It’s that simple!

If you already know the total price and want to calculate how much the VAT is, it’s just as easy. Multiply (X) by 14, then divide (÷) by 114. Using our tractor again, let’s say you were given the total price of R148 200. Simply key in 148200 x 14 ÷ 114 = 18200. So, the VAT portion is R18 200.

To work out the selling price of produce, you need to add all your input expenses and divide this total by the number of units you’re selling (for example, kilograms for potatoes, bunches for carrots, or per large vegetable such as pumpkin or cabbage).

If you have 1 000 cabbages, say, and your input expenses add up to R4 000, divide your expenses by the number of cabbages: 4 000 ÷ 1 000 = 4. Each cabbage has thus cost you R4 to produce. But you want to make a profit too! So add a suitable percentage profit, such as 25% (a quarter). Thus: 4 + 25% = R5. This is your selling price per cabbage. You are therefore making R1 profit on every cabbage.

If you’re working with cattle, they have to be weighed, as the selling price is normally per kilogram. If you don’t have scales, you’ll have to work out the price per animal very carefully. How much percentage profit should you charge? That depends on your market, so get to know it well! And practise working with percentages – a mistake could cost you money.

 

Contact Susan Pletts at 082 572 3724 or [email protected]