BARTERING EXPLAINED. The definitive insider guide
Bartering explained
By Geoff Shilton. Regional Manager, Bartercard UK
There are many misconceptions about corporate bartering. This guide will answer some of the questions that have been popping up around the 4network recently. It is NOT a comprehensive guide,space precludes that, so if anyone has questions that are not answered here please contact the author. Go to my profile in 4networking.biz. . The mobile is always on.
What is bartering? Who are Bartercard?
Bartering has been around for centuries and pre-dates conventional currency. Today it is a globally massive market that last year accounted for ONE THIRD of this planets economy! Large corporations and even countries actively and aggressively barter every day of the week. Think of it as a global swap shop, trading with goods and services in preference to using cash. Major groups such as Coca Cola, General Motors, McDonnell Douglas, Virgin, Pepsi and Panasonic employ this business tool to great effect.
Corporate bartering on a smaller scale is also enjoyed by nearly 2 million companies, mostly SME’s, who embrace the same basic principle and use the services of a Trade Exchange to facilitate their trading.
Bartercard are the World’s largest trade exchange and in the UK use ‘trade pounds’ as a formal alternative currency. A ‘trade pound’ is recognized by HM Customs & Excise and Inland Revenue. All normal accounting rules apply to trade pound transactions, i.e. all transactions are on balance sheet, you raise invoices, charge and reclaim vat as per normal.
How does it work? What are the benefits?
Let’s say a mechanic needs to get £500 worth of literature printed and employs a printer who is part of the Bartercard program. The final invoice is paid in trade pounds which are debited from the mechanics trade account. The printer ‘s account is credited with £500 trade pounds which he/she can spend elsewhere within the Bartercard program with tens of thousands of businesses. The mechanic has saved £500 cash and the printer has won a brand new client who wouldn’t have been available to them in normal circumstances thereby giving the printer a distinct competitive edge.
Now, to expand on this concept a little further, consider this:
For every trade pound you are able to take in and then spend with another Bartercard member, you have been able to release one ‘cash pound’ into your cash flow. On the other side of the ledger, when you spend the ‘trade pound’ for essential goods and services for your business, i.e. advertising, office equipment, marketing, website upgrade, printing etc, you have reduced your overheads by one cash pound.
Bartercard have an on-line member’s portal, auction room and e-commerce trading site plus an on-line directory. There is also a hard copy member’s directory which is updated, reprinted and redistributed every 16 weeks. To complete the package all members have an Account Manager assigned to their account whose job it is to act on the member’s behalf facilitating sales and purchases.
In this way companies build up an account, just like a bank account, with 'trade' pounds that can be exchanged for goods and services. It is not intended to replace cash business, but to create more opportunities for trade. Cash is King but it sure is smarter to barter.
One major advantage for small businesses is the opportunity to utilise excess inventory or spare capacity. From under-utilised manufacturing facilities to surplus goods, bartering gives you the chance to convert previously tied up capital into an expense item.
Another key benefit for a startup business is the ability to overcome cash flow problems. When you first start your business and you need to spend money on stationery, office furniture or a web presence, it can be a considerable outgoing when money is not yet coming in. But if you trade your offering, you can keep cash outlay to a minimum.
Bartering can even get you something you may not have been able to obtain in a conventional manner. In 1626 Peter Minuit, the Dutch colonial governor in New Amsterdam (later to become New York) bartered 60 guilders worth of beads (the equivalent of $24) for the island of …………………..Manhattan!
Date: 28/02/2008
Category: BUSINESS EDITORIAL