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    September-2017
 
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Bartering May Be Effective Cost-Saving Option for Small Businesses

In a recent survey, 13% of small-business leaders said they utilize bartering programs to save on costs and expand offerings.

However, 41% of these respondents to the Information Strategies, Inc., survey said there are pitfalls, and only 66% said they would recommend the programs to another small-business leader.

On the other hand, John Strabley, president of the board of International Monetary Systems Ltd., one of the country’s larger barter organizations, argues:   “Businesses can utilize barter to boost sales production. It’s easy, it’s smart, and it works like a charm.”

Some business owners, Strabley says, are discovering that bartering is another vehicle for moving excess inventory, attracting new customers and generating barter dollars that can be used for advertising and other business expenses.  

Before deciding to barter, a small-business leader must weigh the disadvantages against the advantages. Bartering turns a company’s downtime or excess inventory into valuable commodities. It increases sales while enabling the company to purchase the goods or services needed without dipping into its cash.

Bartering is not limited to business goods, services or needs. Bartering can be a great way to finance a vacation, get teeth whitened or get a massage.

Here’s Strabley’s explanation of bartering:

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 a barter exchange such as IMS (www.imsbarter.com). 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” goods or services offered by other members. As a result, that business is hooked up with a rich, varied network of actively bartering businesses.

What Trading Can Do for a Company

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 the business has excess inventory, it can (and probably does) liquidate the merchandise for a reduced profit. As an alternative, the company can trade that merchandise through a barter exchange—and often receive trade credit for its full wholesale value. The company can then use those trade credits to purchase the services or products it needs to operate.

Gaining New Customers
Bartering can also be a new vehicle for marketing products or services. Barter exchanges bring new buyers and sellers together, potentially creating a new customer base. And barter can positively affect your bottom line. Companies that actively barter may do as much as 5% to 10% of their business annually through trades.
How Barter Exchanges Function
Barter exchanges typically charge a one-time membership fee, a modest transaction fee and a monthly maintenance fee. If a business signs up online, the membership fee is waived.

Barter exchanges offer the advantage that they don’t require an even trade. The credits can be accumulated for one item to trade for several different items that together add up to the company’s total credits.

Be Aware

Barter and cash transactions are the same in the eyes of the Internal Revenue Service. Both are taxed equally. 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.

John Strabley is president of the board of International Monetary Systems Ltd., one of the country’s leading barter organizations. To learn more about the company, visit www.imsbarter.com.


© 2018, Information Strategies, Inc.
P.O. Box 315, Ridgefield, NJ 07657
201-242-0600