originally on http://www.associatedcontent.com/article/8054067/introduction_to_bartering_part_1.html?cat=3
Barter’”exchange of a product or service for another product or service rather than a cash payment ‘” has been around for a long time. Before humans invented the idea of money, they traded things of value to obtain things of value. If someone had a nice mastodon hide gathering dust in her cave, for example, she could trade it to one of her neighbors for several baskets of fish or perhaps some bone tools.
Bartering has come a long way since those ancient times, and nowhere is this more the case than in business. According to industry statistics, in North America alone, more than $7.5 billion in sales are transacted each year by the commercial barter industry, comprising more than 300,000 businesses.
In the world of business, three primary flavors of barter exist:
- Small business exchanges: These barter exchanges bring small-store owners and small retailers together to trade among themselves to avoid having to pay cash for needed supplies and services. Approximately 400 small business exchanges exist in the United States today.
- Corporate barter: Corporations barter a wide variety of products and services to liquidate excess inventory, utilize idle capacity, expand sales, and penetrate new markets while increasing cash flow and conserving precious working capital.
- Countertrade: Countertrade occurs when large multinational companies (think IBM) are required by countries with weak currencies or by law to take partial payments in the form of goods rather than cash.
An increasing number of businesses are making barter an important part of the way they do business. You can, too.
Although bartering goods and services does not generate cash (and therefore is not a source of capital per se), it does enable companies to conserve their cash ‘” spending it only when and where they absolutely need to do so. It’s no wonder, then, that the catchphrase of companies that have integrated bartering into their financial planning is, “Think trade first!”