How It Works
In its simplest form, bartering involves an equal trade. One business swaps a good or service for another.
Through professional barter exchanges—where members pay a commission fee for goods or services traded—more complex trades are possible.
Here’s how bartering works: a business lists a good or service for trade through the barter exchange. In return, the business receives a trade credit based on the dollar value of the good or service offered. It can then use those trade credits to “purchase”
What Trading Can Do For You
Bartering enables businesses to trade inventory for the goods and services they need. Trading excess inventory is a particularly good way to accumulate barter credits.
If you have excess inventory, you can (and probably do) liquidate the merchandise for a reduced profit. As an alternative, you can trade that merchandise through a barter exchange—and often receive trade credit for its full wholesale value. You can then use those trade credits to purchase the services or products you need to run your business.
Gaining To New Customers
Bartering can also provide you with a new vehicle for marketing your business. Barter exchanges bring new buyers and sellers together, potentially creating a new customer base. And barter can positively impact your bottom line. Companies that actively barter may do as much as 5 to 10 percent of their business annually through trades.
How Barter Exchanges Function
Barter exchanges typically charge a one-time membership fee and a small fee on each transaction. Barter exchanges offer the advantage that they don’t require an even trade. You can use credits accumulated for one item to trade for several different items that together add up to your total credits.
Be aware that barter and cash transactions are the same in the eyes of the Internal Revenue Service. Both are taxed equally. In fact, bartering exchanges must report goods and services sold through barter to the IRS.
Like sales, bartering offers no guarantees. Some trades happen quickly, others take some time. Also, the amount of certain goods and services available may fluctuate during the year.
You must weigh the disadvantages against the advantages. Bartering turns your downtime or excess inventory into valuable commodities. It increases sales while enabling you to purchase the goods or services you need without dipping into your cash.
And you don’t have to limit bartering to business. Bartering can be a great way to finance a vacation, get your teeth whitened or get a massage!
Don Mardak is founder and CEO of International Monetary Systems, Ltd. (OTCBB:INLM)
