Bartering Can Pay Many Business Expenses
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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bartering, we can acquire many goods and services for our
don't really want money; we want the things which money can
need to control our balance of cash and barter.
can pay some of our cash debts by bartering.
can pay for some salaries and benefits by bartering.
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.
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.
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:
- 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.
- 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.)
- 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.
- 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.
- 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).
- 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
- 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
- Retailers: we receive 50% of our payment in cash.
- Wholesalers and manufacturers: we receive 75% of our
payment in cash.
- 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
- 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.
- 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.
- 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.
- 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.
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
- 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.
- We can pay the debt with barter-club units. This offer might
be acceptable if the creditor is a member of the barter club.
- 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.
- 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.
can pay for some salaries and benefits by bartering.
- 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
- 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).
- 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
- Discounts. Many retail stores have "employee discounts"
which allow employees to buy the merchandise at a reduced
- 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