The smart business owner, sensing the slowing of the economy and tightening cash flows, will investigate methods for reducing excess inventory and obtaining necessary goods and services with less outlay of scarce capital. One of the best ways for doing this is to barter with other businesses.

This is the most ancient method of doing business. No money is needed. I have what you need and you have what I need. We trade one sheep for one goat. In the modern world it doesn’t work quite that way. I need a computer; you need tires for your delivery vehicle. I sell advertising and you sell pizzas. This is where bartering for business becomes an advantage of the savvy barter network members.

That is why savvy businesses owners join a barter exchange. These are organizations that act as clearing houses for their member businesses. The barter exchange is almost like a bank, keeping a tally of the credits and debits as each member barters with other members. There is usually an initial membership fee and monthly fees. Plus the barter exchange will usually require a small percentage of each transaction as an operating fee.

Your products will be sold at full retail value through the exchange. Since no discounting occurs you retain the full value of your goods and services, which is also good for increasing the productivity of your business as downtime and unused capacity are changed into credits in the exchange.

Another advantage to joining a barter exchange is other members will see your business. Your business will be advertised for free. Also this is similar to hiring an extra person to sell, but you don’t have to pay anything for it. If the other members like what you have to offer, they will tell their friends and they will probably end up being cash paying customers.

One caveat: the fact that actual cash is not exchanged has nothing to do with tax consequences. In the eyes of the IRS, barter of goods and services are considered as if they were cash transactions. At the end of the year, all member businesses receive IRS Form 1099B. All income, whether from cash transactions or barter, must be reported on your yearly income tax return. There are advantages to barter transactions, which are useful business services providing you with more control over your cash and inventory, and these advantages are worth the small price you pay in the form of tax on barter income.

Joining a barter exchange is a smart business move for most businesses. It is an especially great boost for a startup business which may be cash poor. Your customer base can be increased and goods and services obtained while initial capital is preserved. Established businesses also benefit with an expanded customer base, increased sales and reduction in excess inventory.

Bartering is the best way for business owners to clear out excess merchandise and acquire needed merchandise Bartering means exchanging something you need with something the other person needs. Bartering for business allows you to work with other network members to create a marketplace. Join a barter exchange which is a clearinghouse for member companies. Each exchange tracks its clients’ credits and debits as they barter. Your products sell at full retail value. This also helps you increase productivity and allows you to market yourself to other members. Bartered goods and services are treated similarly to cash transactions under tax laws. However, the advantages far outweigh the inconveniences.

- Terry Lamb