Have you ever faced any of the following situations? One: You need a lawyer but you don’t have the cash for the retainer. Two: You have a warehouse full of inventory that just isn’t moving. Three: Sales are down and you need more customers.
Each of the above problems might be alleviated by bartering.
1. What Is Bartering?
Bartering is simply exchanging goods or services without money.
For example, you give your accountant and his family a meal in your restaurant in exchange for the preparation of your income tax return. This is a barter transaction because no cash changes hands between the two parties.
2. Bartering Improves Liquidity and Profits
A shortage of cash is not an unusual situation for either businesses or individuals. Perhaps you would like to advertise in a certain publication but just don’t have the money. Have you considered exchanging something of value that you have (a service or product) for the advertising you need?
Such a barter deal is mutually advantageous. Neither party has to part with cash to obtain the desired goods or services.
Not only does bartering conserve cash, but it can actually generate sales and profits. Inventory turns over more quickly. Service providers sell more of their time than they would had they insisted on cash.
3. Bartering Creates New Customers
Notice, also, that both parties just made a sale to someone they wouldn’t normally have. You both just received a new customer.
If happy, your new customer can refer you to many more customers, including ones who pay cash. Perhaps your original barter customer may also start paying cash in future transactions with you.
4. Barter Exchanges
In addition to trading with individuals and businesses, you might consider joining a barter exchange.
A barter exchange is a business that facilitates the exchange of goods and services between its members. There are membership fees for joining. Also, the barter exchange charges a commission on transactions made through it.
5. Tax Aspects of Bartering
Barter transactions made by your business must be reported for income tax purposes. Also sales taxes may apply on such transactions.
For increased liquidity and new customers, consider bartering your way to profits.