Bartering Can Pay Many Business Expenses

By James Harvey Stout (deceased). This material is now in the public domain. The complete collection of Mr. Stout's writing is now at >



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  1. By bartering, we can acquire many goods and services for our business. 
  2. We don't really want money; we want the things which money can buy. 
  3. We need to control our balance of cash and barter.
  4. We can pay some of our cash debts by bartering.
  5. We can pay for some salaries and benefits by bartering.    

By bartering, we can acquire many goods and services for our business. Those items include accounting, office supplies, advertising, printing, employee benefits, office equipment, cleaning, printing, computer hardware and software, etc. Some barter clubs have members in those categories and in many others; we can also set up one-to-one deals with our current providers -- and if they won't barter, we can look for providers who will barter. If we barter for those goods and services, we have more cash available for our profit and for our cash-only expenses -- taxes, salaries, lease, utilities, etc.

We don't really want money; we want the things which money can buy. Money is just an abstraction, a unit of exchange; it is a middle-man -- sometimes an unnecessary one -- when we could acquire the things almost as easily by bartering. When we start to think this way, we create a different model for both selling and acquiring; now, money is only one option in our system of exchange. Sometimes we spend and receive money; sometimes we "spend" and receive the specific goods and services which we want.

We need to control our balance of cash and barter. We cannot live by barter alone; we still need to receive some money. Our life is already a mixture of cash and barter; for example, we trade in a used car as a partial payment for a new one. In our balance of cash and barter, we can consider these points:

  1. Losing our cash customers to barter. When we announce our willingness to barter, we will attract new customers who would prefer to deal with us than with our cash-only competitors. However, some of our current cash-paying customers will want to switch to barter; obviously, this will reduce our cash flow -- but the situation might not be a problem as long as these current customers offer us something which we need anyway, and as long as we still have enough cash coming in. To prevent our cash-paying customers from changing to barter, we can ask our barter partners not to tell anyone about the deals, and we can consider the deals to be special cases, exceptions to the rule.
  2. Cash to a supplier. When we barter our goods, we have to replace those goods by buying them from our supplier -- probably for cash. In some cases, we might be able to find a supplier who is willing to barter; the supplier might even be a member of a barter club. (One club says that its staff is willing call your suppliers, to ask them to join the club.)
  3. Cash for services from a third party. For example, a doctor might be a member of a barter club -- but if you require tests from a lab which is not a member of the club, you will probably be billed in cash for those tests. An agreement could say, "Out-of-pocket costs are payable in cash" -- and then the agreement would specify those costs.
  4. Cash for the parts from a third party. For example, a plumber might be willing to barter for the labor, but we probably have to pay for the parts which are being bought with cash.
  5. Buy at 100% barter, but sell for part cash and part barter. In one barter club, this arrangement is available to manufacturers, wholesalers, retailers whose products cost more than $1,000 (e.g., car dealers), and retailers who earn only a small profit on each item (e.g., grocery stores).
  6. Select a particular percentage which can be paid by barter. At a barter-club, we might find various options:
    • Barter only. When we buy, 100% of the price is charged to our account. When we sell, 100% of our price is credited to our account.
    • In a "part cash" program, we choose the percentage which will apply to both our purchases and our sales. For example, as a "50% member," we receive 50% cash on our sales, and we spend 50% cash when we buy.
    • In some clubs, the percentage depends upon our type of business:
      • Services: we receive payment in 100% barter-club units.
      • Services which require materials (e.g., a landscaper's trees): we receive 25% of our payment in cash, and 75% in units.
      • Retailers: we receive 50% of our payment in cash.
      • Wholesalers and manufacturers: we receive 75% of our payment in cash.
  7. Expenses which are directly related to bartering. When we use a barter club, we have new expenses (most of which must be paid in cash): annual dues, transaction charges, etc. We can consider these issues:
    • Small profit margin. If the transaction fee is 10%, and our profit margin is only 8%, we are losing money when we accept a barter-club check. Some clubs will allow us to refuse to sell some of our goods to the members; for example, we might prohibit members from buying goods which have a profit margin of 15% or less.
    • High-priced items. For example, if we sell a $20,00 boat, a 10% transaction fee would be $2,000. However, some clubs have a lower percentage (in the contract, or by individual negotiation) on high-priced items, so that we might have to pay only 5% or less.
    • Low-interest credit. The barter-club membership is an expense, but if we use it as a line of credit, we are still paying less than we be paying for a credit card which would charge 20% interest on our purchases.
  8. Perishability. Although a trade might cost money (for the barter club's fees and other expenses), it can still be worthwhile if we have perishable items:
    • Goods. If the goods are going to be discarded anyway, we might as well barter them and accept whatever payment we can get. These goods can include anything whose value is diminishing: grocery produce, discontinued items, products which are going out-of-style, etc.
    • Services. Bartering starts to look like a good deal as we look at our vacant hotel rooms, our empty appointment schedule, and the unsold advertising space in our newspaper. Day by day, we "use or lose" our services, and so we might be more willing to trade them for any useful items.
  9. The monetary value of our time.
    • If we are bartering through a club, we might require more time for bookkeeping and paperwork. However, one dentist said that he prefers customers who are barter-club members because he doesn't have to bother with credit problems, or insurance paperwork, or the creation of time payments.
    • If we are doing one-to-one trades, we will require time for negotiating the trades. However, some businesspeople enjoy this "haggling" as a challenge and a game.
  10. Frivolous expenditures. Whether we are using one-to-one deals or a barter club's units, bartering can set us free, like a kid in a candy store. Units might not seem like real money, so we might be tempted to spend them on non-essentials (like an exotic vacation) while we are ignoring our cash-only bills.

We can pay some of our cash debts by bartering. When we barter, we are usually focused on our current expenditures, and our future debts -- but we can also erase some of our past debts. We can consider these options:

  1. We can pay the debt with our goods and services. For example, if we have a long-standing $1,000 debt to a store-owner, the store-owner might allow us to pay off the debt by using our carpentry skills to do $1,000 worth of remodeling in the store.
  2. We can pay the debt with barter-club units. This offer might be acceptable if the creditor is a member of the barter club.
  3. We can barter to get something which is needed by the creditor. If the creditor is not a barter-club member, and if he or she does not need our goods or services, we can approach a third party with the barter-club units (or with a one-to-one deal) to acquire goods or services which the creditor needs.
  4. We can convert a cash debt to a barter debt. For example, if we are making cash payments for a car, we can sell the car, and then barter for a different one from someone who will let us make the payments in barter -- perhaps with a monthly amount of barter-club credits, or with an ongoing service (e.g., hairstyling, if we own a hair salon) until the debt is paid off.

We can pay for some salaries and benefits by bartering.

  1. Salaries. The options include:
    • Paying part of our employees' salaries in barter-club units. The employees can spend these units like cash, at other businesses which are barter-club members. Obviously, we cannot pay our employees in 100% barter -- but even a small percentage will reduce our cash expense, and it might allow us to give raises (in the form of barter-club units) which we could not afford otherwise.
    • Using outside contractors. For example, instead of hiring another part-time data-entry person (who would need to be paid in cash), we send the work to a secretarial service which is a member of the barter club (or is not a member, but is willing to make a one-to-one deal -- perhaps trading the data entry for meals in our restaurant).
  2. Job benefits. Whenever we offer goods and services (in the form of benefits) to an employee, we are bartering; i.e., we are using a non-cash commodity in partial payment for the employee's services. We can offer many types of job benefits by bartering:
    • Our services. For example, many colleges offer free tuition to the instructors and their children.
    • Our goods.
      • Free goods. For example, restaurants usually give free meals to their employees during the shift; this is a job benefit.
      • Discounts. Many retail stores have "employee discounts" which allow employees to buy the merchandise at a reduced price.
      • Wholesale prices. For example, at one pizza restaurant, employees were able to add their own household orders onto the restaurant's order for cheese, meat, and vegetables, to take advantage of the wholesale rate.
      • Stock in the company. Some companies permit their employees to buy the stock at a reduced rate.
    • Goods and services from a third party. With barter-club units, or with one-to-one trades, we can acquire many items which can be used as job benefits.
      • Standard job benefits. One large barter club has a benefit program whereby we can offer dental services and legal services to our employees at a 50% discount; we pay the other 50% with our barter-club units. We might be able to make a similar deal with a service-provider without having to go through a barter club.
      • Incentives. These incentives might include a Caribbean cruise for our top salesperson.
      • Christmas turkeys.
      • Prizes. The prizes can be goods, services, or gift certificates.