When you are growing your business, you can’t avoid running short of cash. The demand and expenses increases as your business is developing, so you may need more and more cash to uplift your business status.
The barter system for getting goods and services dates back many centuries.
In most cultures the barter system was used before money was created. People who had specific items or services to sell would exchange them with others for the things they needed.
Barter thus transcends the monetary system.
Today the barter system can be used in a much more sophisticated way than ever before yet it carries with it the same basic motivation – the need for something that you don’t have and the excess of something that someone else wants. Barter allows you to negotiate the worth of your item or service in relation to products or services that you want.
In North America some $600 billion in bartered commerce is transacted annually, much of that facilitated by sophisticated trade exchanges like Ormita, ITEX, and IMS
You can consider applying the concept of Barter Exchange for your business to alleviate the expenses. Barter is defined as “to trade without the exchange of money.” The concept of this is both parties should accept the value offered. Barter exchange means to introduce business traders to each other.
A usual barter exchange scenario might start with a carpet installer offering $ 1000 of installed carpet in return for $1000 in oil changes which are traded to a trucking company, for $1000 in trucking which is then traded by the carpet installer to a printer who offers $1000 in printing.
From Jill Kuchenski, an accounting pro and member of a trade exchange –
Bartering is typically fully taxable to both parties involved when used in business transactions. This includes both services and sales of products. The amount of income reported would be to the extent of the value of the property or services exchanged. When the value of sales or services exchanged are the same, the income reported by both would be the same but in the same aspect, the merchandise or services being exchanged for are fully deductable in a business transaction. In most cases the income and the expense would be a wash, regardless of the valuation of the property or services exchanged. However, if the exchange was for personal usage, typically it cannot be deducted from taxes. For instance, if a roofer exchanged his services to reroof a personal home for house cleaning services. The income would be taxable, however, the services exchanged is a personal expense and could not be deducted.
If one service or product is valued higher than the other being exchanged, you still must report your contribution at the value you exchanged. You would still deduct the exchange at the value of the service or product. For instance, if your services valued $100 and the other company services valued $50, you would still have to claim the $100 as income, however, only could deduct $50 of the exchange. Again this is for business transactions only.
If you are still starting your new business, you can always apply a barter exchange concept. You may approach suppliers of goods and services you need, and offer something of value in exchange for the products you need.
{ 3 comments }
This was a good primer on barter-trade past and present. We have used barter in our water filtration business many times.
Barter, modern 21st century barter, is a great tool for small businesses – its both a financial solution and a marketing solution.
We used barter to get cheap tee times in Las Vegas at the Siena Golf Club. It was great!
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