Bartering has been around in various forms for centuries. Business bartering, or the non-cash exchange of goods and services, is a potential win-win for all parties involved. In particular, this practice provides you with an opportunity to control costs while growing your business.
When deciding whether to engage in business bartering, you should consider these factors:
Bartering Fosters Relationships
Bartering often takes place between businesses and their vendors. When conducted successfully, these types of transactions can foster long-term relationships, which are particularly valuable to businesses that rely on suppliers to keep their inventory stocked.
It's a Great Way to Move Inventory
Many businesses experience seasonal slumps or accumulate outdated assets and inventory. If you barter with the right parties, you can take advantage of key opportunities to liquidate goods that are no longer of use to you, as the other party may need these assets.
It's an Effective Alternative to Collecting From Customers Who Miss Their Payments
If a customer has a long-overdue payment, you can attempt to collect by taking him or her to court. But you may not want to get entangled in drawn-out, costly court proceedings. Instead, you can look for ways to relinquish this debt by asking the customer to provide you with inventory that can help to improve your business operations.
Bartering Offers Strategic Value to Startups
A startup is often hard-pressed for cash to pay for anticipated growth and expansion, especially when it's in its earliest stages. As such, this can be the perfect time for a business to offer its own services in exchange for assets such as marketing and advertising consultations, web design and office renovations. When such transactions go smoothly, a startup can encourage the other businesses to become its brand advocates, spreading the word among their own networks about the value of the new company's goods or services.
Pay Attention to the Tax Implications
You should never assume that the IRS doesn't care about your bartering activities just because cash is not exchanged. On the contrary, in such situations, the fair market value of exchanged goods and services must be reported and listed as an expense during the year in which the exchange takes place. To help ensure that you're protected, you may want to consult with a tax attorney before engaging in these types of transactions.
Explore Bartering Networks
There are a variety of networks and exchanges, such as the International Reciprocal Trade Association, that specialize in connecting buyers and sellers in trades. But, as Forbes notes, it's important to look into an established bartering network's regular fees and charges before you decide to join.
Business bartering can be a cost-effective alternative to typical transactions if you approach it with caution and some advanced knowledge. By keeping these considerations in mind, you can determine if this practice is right for your business.
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