Bartering Can Improve Your Financial Position

The centuries-old practice of bartering is the act of exchanging one commodity for another without the use of money. Whether trading child care for pet sitting, or exchanging house cleaning for landscaping, it has always been a part of our global culture. In these tough economic times, bartering has been taken to a new level; small and medium-sized companies are increasingly using this technique to retain cash on their books.

General Advantages

• Bartering makes it possible for you to “sell off” excess inventory.
• Create a market for the excess time and talents you aren’t using.
• Allows your cash on hand to keep working for you; it’s easier to borrow money or establish credit lines when you already have money.
• You will usually be able to sell products for market price (the going rate across their industry), as opposed to garage sale or discounted prices.

Direct Bartering

• This type of trading is accomplished person-to-person through a site such as Craigs List, or by joining a barter service with no membership or transaction fees.
• When an exchange differs in value on one side, you can pay the balance with cash or an added product or service; this is called “the boot.”
• Direct bartering is typically used for personal services like child care, errand running, and as trade services such as plumbing and electrical work. Also a favorite for sellers of personal items like a dresser or drums.
• Keep a lookout for helpful “Horse Traders;” people who have a talent for setting up multiple trades that benefit several people in one transaction.
• Establish and maintain reliable contacts, to make your exchanges happen more rapidly.

Online “Bartering Exchanges”

• You will earn and spend trade credits within a complex system of possible products and services; you are not limited by having to search for another company who is looking for your specific offering.
• Your services or products will be assessed at market value to create a non-cash currency for equivalent trade.
• Exchanges can expose you to new commercial customer bases you wouldn’t otherwise have the opportunity to reach.
• Joining this type of network can provide additional services, such as corporate trading and personalized assessments and solutions.

Points to Remember

• Barter etiquette dictates that you conduct yourself courteously and professionally at all times. Be certain to thoroughly communicate on a timely basis, throughout the entire transaction.
• Remember to use relevant photos (many users will exclude clicking on postings without them). Ask yourself if you would you choose your posting from hundreds of others?
• Business bartering is treated the same as any cash transactions, and you must claim it on your Schedule C, Profit or Loss from Form 1040. You will be posting “trade sales” to your books as income or assets (depending on whether you use a cash or accrual basis), and “trade purchases” as expenses. You still gain the advantage of showing greater revenue, and utilizing business expenditures for deductions; while maintaining liquid cash on your books.

Whenever you speak with another business owner, think about whether they have something you would like to barter for and whether you have a valuable trade for them. Be creative and realistic; you might for instance trade your quilt-making services for a bed and breakfast accommodation. You will be amazed at how much increased exposure your company will enjoy, by bartering your services within your “sphere of influence” and across the World Wide Web.

Michele Allen writes on various topics. She’s almost done with her CNA training and is very much looking forward to beginning her CNA career.