E-Profit Today

As the economy slows and cash flow tightens a savvy business owner will look for ways to reduce excess inventory and get needed products and services without the outlay of scarce cash reserves. The best way is to trade with other business. In other words: barter.

It is the oldest means of conducting transactions. No currency changes hands. We each have what the other needs. We trade a horse for a cow. Nowadays, things operate differently. I require a laptop; you require a set of tires for your delivery van. I deal in marketing and you do professional printing. So you can see there is a definite benefit to network bargaining for commercial purposes.

For this reason, smart business owners will join a barter exchange. A barter exchange serves as a clearing house for each of its member companies, something like a bank. Each barter exchange will track its clients' credits and debits as they barter goods and services with each other. Such exchanges charge a fee to join, a fee to maintain membership each month, and usually ask for a small share of each transaction to maintain their operations.

The exchange sells your products at their full retail value. Since your products are not discounted, there is no loss of value of your goods and services. Thus, business productivity is increased while downtime and reserve capacity is reduced by conversion to credits within the exchange.

Another great thing about joining a barter exchange is that your business will actually be marketed to the other members of the exchange. Just think, it's like free advertising or having another person on the sales force. And once the members decide they are satisfied with your product or service, they may refer other people to your business which will increase your customer reach.

The business owner should be aware of the tax consequences of barter. Barter income must be reported on the yearly tax return. Although no cash is exchanged, the goods and services exchanged in trade are treated by the IRS as cash transactions through IRS Form 1099B, which is business members received at the conclusion of each fiscal year. The tax, however, is a small price to pay for the additional revenue accrued through the extra business available on barter exchanges.

A barter exchange is an appropriate move for most businesses. If the business is a newly created venture then it can be extremely profitable both in the ways of cash and other needed goods. It can also help to obtain services that a start up or small business would not normally have the money for. Larger businesses can use this system to lower their inventory.