Tip for Small Business Owner

The concept of bartering goods and services is not a new one. It was practiced for thousands of years before hard currency took over as the basic facilitator of trade. But how can barter help a small business today?

If your business is cash-strapped, you can help preserve your war chest by "purchasing" a needed good or service without using money. In exchange for the good or service you have received, you will offer your products or services as "payment."

How can you find people with whom you can barter? Many cities have organized barter networks, through which members provide their goods and services to other members of the network for "barter dollars." They can then purchase goods and services from other network members with their accounts.

When using a barter network, you don't have to exchange with each individual member from whom you want to purchase. For example, if you want to use the graphic design services of Kelly, but she doesn't need your plumbing services, she does the work for you anyway and receives barter dollars that she can spend elsewhere on the network.

If there isn't a barter network in your community, there will still be many small business groups whose members can unofficially make arrangements with each other to barter wares.

There are some important dos and don'ts for bartering:

• In most countries, you must claim barter income for income and retail tax purposes. Likewise, you may claim deductions for barter business expenses. Check with your accountant for the laws in your jurisdiction.

• Purchase only barter items that you need for your business. Treat barter dollars as you would real money and don't overspend.

• Make sure that you are comfortable with the quality of the services provided by the network members you deal with. You should assess the quality just as you would if you were paying cash for the item.

• If you are engaged in an informal barter arrangement, draw up a written agreement as to the amounts agreed upon and the time frame for completion. Ensure that both parties have the same understanding of the nature of the arrangement.