FAQ
Q Why use trade Dollars instead of cash?
A Maximizing cash flow is a top priority of all businesses, small and large. Using trade dollars, as an alternative to spending cash, helps You conserve cash.
Q Are Trade Exchanges legal?
A Yes. Under the “Tax Equity and Financial Responsibility Act of 1982″, the federal government officially recognizes Trade Exchanges as third-party record keepers-meaning they record barter transactions and report client barter income to the IRS. This puts Trade Exchanges on equal footing with banks, credit unions, securities brokers and others as legitimate custodians in the eyes of the law.
Q How can Barter increase my cash flow?
A There are several ways in which barter can increase Your cash flow:
Business and Personal expenses can be converted from cash to trade transactions, thereby freeing up Your cash.
The New customers You get through Your Trade Exchange are great sources of Referrals and word of mouth advertising to attract New Cash Business.
You can use the Trade Dollars You earn to purchase all forms of media advertising to attract more Cash Business without the out-of-pocket cash costs.
Q Who can benefit from barter?
A Just about any business with excess capacity or surplus or slow moving inventory can benefit from bartering. This is especially true if Your inventory is perishable like radio time, billboards, hotel rooms, airline tickets, empty tables at restaurants, event tickets or Your time if You provide a service. A key consideration is that Trade Dollars have a storable value and Your perishable inventory doesn’t.
Q Why join a Trade Exchange?
A Trade Exchange eliminates the limitations of one-on-one Barter where each business must want what the other business has to offer. When You belong to an exchange You are paid in trade dollars, which You can then spend with any other Member. This way when You are the Seller You do not have to turn away any business because You don’t want what the other person is offering. Using Trade Dollars also helps when You want to make a Purchase and the other person doesn’t want what You have to offer.
A Trade Exchange will Save You the Time and Effort of having to find compatible Trading Partners.
A Trade Exchange helps You market Your products and services to other Members. An Exchange acts as a third party record keeper, providing monthly statements to clients, which reflect all trade purchases, sales and a current trade dollar balance. When You are a Member of a Trade Exchange You do not have accounts receivable to collect or bad debts to write off . You are paid at the time You provide Your product or service.
Q Can I get anything on Barter?
A No. There are some things that you probably won’t be able to find on trade, including: utilities, tips, mortgage payments and money payable to local, state and federal governments (taxes, business licenses, traffic fines) etc. Also items with thin margins are rarely available in a Trade Exchange. You can however, use Barter to “Free Up” cash to pay for the things You can’t trade for.
Q Do you barter these items, as well, either by owner or auto dealers?
A It will depend on the member, if an exchange has a member that barters these things then yes.
Businesses will barter according to their inventory, time availability and mark-ups. But remember, if you can’t find what you want on barter, you can convert other cash purchases to barter and save up the cash for those items that aren’t available to barter.
Q What percent of my business can be done in barter?
A Many barter experts recommend that bartering be kept to no more than 10% – 15% of Your total business. I believe there are too many variables that are unique to each business to make a blanket statement. The best thing to do is evaluate Your current business situation and decide how much You can safely trade without adversely affecting Your cash flow.
Q What is the maximum balance one should expect to carry, if one plans to spend about $1,000 per month?
A I suggest 3 times what you intend to spend. Same theory applies to cash. You want a 3-month reserve in case things should slowdown. However, depending on your credit line and spending habits, more may be needed for those once in a lifetime deals. Nothing worse then finding something you never thought to find on barter and having to take the time to get the funds together! Often if it’s exceptional, you have to buy it right then or it’s gone!
Q Are there any tax advantages to barter?
A There are no tax advantages or disadvantages to barter. The tax code treates barter transactions identically to cash transactions. Barter sales are considered taxable income in the year they are credited, barter purchases and related barter expenses are considered tax deductible expenses.
Q Why do some products and services cost more on Barter than for cash?
A Because the cash economy is so competitive You can always find someone who is willing sell their products and services at steep discounts or even at a loss. In a Trade Exchange, Members sell their products and services at full retail value. On the surface it would seem like You are better off paying cash, however this is only half the story.
Although on a retail for retail comparison the cash price may be lower on a particular item, You have to take into account the cost of Your Trade Dollars which is the wholesale cost of Your products and services. Since You are effectively buying at Your wholesale cost You may find You are actually better off paying for the item with Trade Dollars.
Q Who can barter?
A Any business owner, professional or individual who has a product or service to offer on trade for which there exists some demand. The higher the demand for Your product or service the more opportunities you will have to trade for the products and services You want and need.
