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Why Pay Cash If You Can Barter?
August 20, 2007, 1:19 pm
Some ideas about bartering for goods and services in order to save cash.
A rising trend in business – a trend that individuals can copy and save lots of money personally– is the use of the barter system. Take a close look at how large companies run their businesses, and you’ll see that they often trade goods and services for another company’s goods and services, leaving the cash that flows in available for other things.
Let’s say you own a small business, like a restaurant, and you want to advertise on a radio station or in a magazine, but you can’t afford to pay cash for their advertising rates. So you offer to pay in barter, which means you give that station or magazine the same amount of money in dining at your restaurant. They, in turn, give it away in contests or use it to entertain their other clients.
For business owners, barter organizations are emerging as a major part of the business community and a great way to fill business needs affordably. These organizations work by building a membership of companies who pool their collective products and services and make them available to other members. It’s particularly effective for service-oriented companies whose product is labor and requires little or no out-of-pocket expense.
Whether you go through a central clearinghouse or develop your own barter relationships, it’s worth considering. For example, if you own an office cleaning business, for the effort it takes to clean a few offices you could have many of the services you need taken care of at no cost. Clean a printer’s building and they may offer to design and print your flyers for you. Clean an auto repair business and they may agree to take care of oil changes and tune-ups on your company van.
Barter also works in your personal life. For example, if you enjoy yard work and your neighbor is a hairstylist, it would be very easy for the two of you to come to an agreement that would enable your families to get the other’s services at no cost because the costs are fairly equitable in the long run. Even if your product is considerably more expensive than your neighbor’s, you can work out some kind of fair trade. Let’s say you take care of children in your home for $100 a week, and you're currently paying $25 a week for lawn care service. You could offer to take care of your neighbor's child for $75 a week if he agrees to take care of your lawn for free.
There are a few things to look out for when it comes to barter. First, a barter relationship is particularly dependent on mutual trust. The system completely breaks down if one person tries to take advantage of it and get more than what they give or engages in unfair business practices. In other words, if you own a restaurant and you’ve agreed to give a plumber several meals in exchange for fixing a leak in your pipes, you have to honor your end of the bargain once the repairs are made. In fact, it’s always a good idea to put your agreements in writing, in case there’s a dispute down the road.
Another important factor is taxes. The way tax laws change from year to year, it’s important to discuss your barter practices with your accountant to make sure that you’re not setting yourself up for a huge tax liability at the end of the year.
For the most part, barter can be an efficient way to operate your small business or personal life and get the goods and services you need at an affordable cost. Just make sure you communicate clearly within your barter relationships to avoid any misunderstandings.
About Springboard Nonprofit Consumer Credit Management
Springboard is a nonprofit credit education and financial counseling organization founded in 1974. The agency offers personal financial education and assistance with money, credit and debt management through confidential counseling. Springboard is accredited by the Council on Accreditation, signifying high standards for agency governance, fiscal integrity, counselor certification and service delivery policies. The agency provides pre-bankruptcy counseling and debtor education as mandated by the bankruptcy reform law. Springboard is a HUD approved housing counseling agency and a member of the National Foundation for Credit Counseling, a national organization of nonprofit credit counseling agencies. The agency has several locations in California and offers face-to-face and nationwide phone counseling services. For more information on Springboard, call 1-800 WISE PLAN (1-800-947-3752) ext. 7750 or visit their web site at www.credit.org.
