Want to Trade? In a Down Economy, Bartering Might be Worth Considering
Remember when you were a child. You didn’t have much cash, so when you wanted something a friend possessed, you’d find something you owned and offer it up the with an eager “Trade you!” Well, trading, or bartering, has grown up.
Businesses sometimes find trading an item or a service to be beneficial. And bartering, or exchange, websites have gained sophistication over the years. A company can exchange almost anything without money changing hands. The National Association of Trade Exchanges asserts that, in addition to conserving cash, bartering can increase exposure inside and outside of your community, expand your purchasing power, and help to move overstocked inventory.
Choosing your process
When it comes to initiating the bartering process, you have two options. You can barter directly with another business if what you have to offer each other seems of mutual benefit. This approach limits the variety of goods and services you can receive in a transaction. And a certain amount of trust is required because there’s no third party involved to ensure the timely delivery of goods or services from either side.
Alternatively, you can turn to an exchange company that will consult with you to determine your company’s needs and then do the legwork.
This can give you access to thousands of companies in a variety of industries and markets.
Some companies join a barter exchange for the increased marketing and exposure opportunities as well as the trading possibilities. Some members benefit by forming new business relationships with their trading partners.
The qualifications for what constitutes bartering have broadened to include several options, above and beyond simply trading goods or services. With the help of an exchange company, for example, you can turn liquid assets into trade credits by selling excess inventory to another market. You can then use your trade credits, possibly along with cash, to purchase business needs. One example would be an office supply store exchanging an office printer with a cleaning service for a month of work.
By turning excess inventory or underused services into trade credits and using those credits to pay for items your business requires, you can keep your operations running at full speed without putting forth cash you can’t afford to spend. Plus, with the help of the exchange company, a business can put its credits toward other expenses — for example, hotel accommodations for a business trip. With the flexibility trade credits provide, the options for what your company can acquire in exchange for its goods or services are almost limitless.
Taxes, still a certainty
Keep in mind that, even though bartering can save you money on various expenses, taxes are still as certain as ever. Barter deals are treated just like cash transactions, so you’ll have to report whatever you trade as income and the goods or services you acquire as expenses.
The IRS views barter credits as real dollars, so you won’t receive any additional tax benefits or penalties if you use a barter exchange. However, you may be able to contribute barter credits to a charity, which could allow for a tax deduction.
Please contact one of our tax professionals if you have additional questions.