What are the benefits of bartering to your business?

The conventional way for many a business to trade is that you win a contract to do some work for a customer, buy the necessary stock and materials to do the job, complete the work and then deliver the finished product. Then, you can end up waiting a long time before your customer settles the invoice – sometimes as long as 3 months.

If cash flow is tight, which it is for many businesses especially in the current economic climate, the delay in being paid can be problematic. It is particularly relevant to many new business start-ups as they have to plough so much of their financial resources into setting up the business that involves buying such things as machinery and stock resulting in there not being a huge amount of liquid funds available. For many a business, they become dependant upon utilising an overdraft facility but that has the negative effect of reducing their net profit as they will be paying bank interest and fees.

Well, there is an alternative and that is called bartering or it is also known as swapping. Bartering has been taking place for hundreds of years. In fact in 2011 over 400,000 businesses around the world took part in swapping with $12 billion ‘s worth of goods and services exchanging hands.

So, how does a business participate in bartering? There are two main ways: -

Firstly, by exchanging goods. For instance, your business may own a piece of machinery that is being replaced for a newer model. You are aware of another business that does the same kind of work as you but you know would benefit from the piece of machinery that you are getting rid of. That business may have a computer system that they are replacing with a new one and, because your computer system is older than the one they are dispensing with, you would benefit by using their old one. The solution is simple – you swap your old piece of machinery for their old computer system with no money exchanging hands.

Secondly, by exchanging services. For example, you may be a plumber and a friend of yours is a tiler. You are both upgrading your bathrooms so you agree to do the plumbing work on his bathroom and he agrees to do the tiling in your bathroom with no funds changing hands. 

In both these examples, as no funds have passed between any of the parties, cash flow liquidity is maintained and indeed, possibly, improved. This means that the cash that was not used to buy the goods or services could be used for another purpose such as buying further stock to enable the business to complete additional orders this increasing profitability.

It is also an excellent way of disposing of out dated stock and machinery that may have cost a significant sum to have removed from your business premises and disposed of. 

Another benefit to a business is that by participating in what, to you, is a new way of trading may lead you to being introduced to businesses that you may not previously have come into contact with when operating under the more traditional way of trading. This could lead to additional business thus improving the business’s profitability.

So, the above are just some of the ways of your business benefiting from bartering. Swapping is here to stay and is growing all the time so why not give it a go!