Bartering is a kind of trading goods or services for another without actually using any medium of exchange, including money. A barter economy differs from the regular monetary economy in several ways. In a barter economy – a reciprocal act – the goods and services are exchanged straight away. It’s fair trade as the involved parties instantly get what they need the most. There are times when cash may not be readily available, and the barter economy comes into play. Importantly, barter helps in saving cash. As a business person, barter permits you to get what you need the most in exchange for your goods or services. This helps you conserve cash, only to spend it on other more important priorities. Hence, the payment is made through exchanges in this system to new or existing customers.
What is bartering? How does bartering help businesses?
Bartering helps multidimensionally
Bartering is beneficial in many ways as it reduces cash flow, operational cost and overhead cost. Business requires cash and this system helps in preventing and preserving the money. The barter system helps you get various services, including accounts and bookkeeping, housekeeping, tours, and travels, to name just a few. With the regular addition of new customers, this system earns you more than your daily business. Most business owners find that the system increases their buying power. Here, the cost of the products or services is the wholesale price. So, you generate more sales with built-in profits, which makes your transaction more economical.
Bartering offers the winning edge over the competitors.
Precisely, barter is an impressive way to expand the customer base, generate additional sales, improve cash liquidity and hence, overall profit. This offers a winning edge over your competitors in the industry. The barter system helps you with ineffective inventory management, and you can convert the excess inventory into valuable services or the products you require the most. You also avoid having to liquidate the available excessive inventory via discounting schemes. The system offers you the opportunity to use the inventory regularly, earning additional profits. The bartering system helps you accomplish the objective by matching your expertise with the business looking to buy your services or products. It helps a business owner put the employees, inventory and equipment to efficient and effective use. This opens the door for additional revenue that would not have been available otherwise. This revenue helps in the business expansion. You can finance buying fresh equipment or raw materials to support the existing business. Summarily, your less productive assets are exchanged for more valuable ones.
Bartering yields better value for obsolete assets
You may have idle or obsolete inventories, and bartering yields better value. The barter system improves your buying power. You can sell the inventory for trade credits close to the book value. We all know that the present monetary system is quite complex, with the involvement of buyers, sellers, middlemen, banks and even the government. A barter system is quite easy, having just two parties. In simple terms, it is a direct trade of commodities without any monetary involvement. Here, each party gets what it desires. Bartering is one of the oldest and simplest ways of commerce. Generally, barter has a direct dealing between two participants, but it can occur among more than two parties.
Bartering exchanges help in revenue generation. The most important reason business owners join a barter exchange is because they want a boost to their regular business. Membership in a barter exchange introduces their products and services to thousands of new customers without requiring outlays of cash for either advertising or sales promotion. The exchange locates new customers and expands sales opportunities to help its members gain a greater market share. Barter trade business is not a replacement for cash business. We all understand that in the past, present, and the foreseeable future, the base of any business is cash, but a barter exchange offers a good addition to the cash base of any business. It’s a new source of income.