By Andy Roe, General Manager, SurePayroll
In small business America, cash is king. If you’re running, say, a small bakery, you can’t afford to be highly leveraged and you probably don’t have a venture capitalist backing you. And yet, two in five small businesses don’t have extra cash on hand for new opportunities or unforeseen setbacks, according to a recent SurePayroll survey. While only 15 percent are in debt, many more are not able to save significant amounts of cash. One way some are mitigating a lack of cash flow is through bartering. There are two main ways to do it.
Like most things, the concept of bartering has been automated and expanded on the Internet. Online exchanges like the International Barter Exchange and ITEX allow you to trade goods and services for virtual currency that you can use to purchase other goods and services. This includes everything from office furniture to advertising to vacations.
Why are businesses doing it? For one thing, it saves cash. Rather than spending actual dollars on a marketing campaign, maybe you’re trading your towing services or your bakery goods or whatever it is you happen to make. The exchanges also provide a way to market your services. You’re sharing what you do with a network of hundreds or thousands of local and national businesses.
What could be a laborious task of doing the bookkeeping and accounting for bartering is also taken care of by the online exchange service. Note that, according to the IRS, barter exchanges are required to issue Form 1099-B to their clients.
Old Fashioned Bartering
Of course, bartering also happens on a person to person basis. The barber gives haircuts to the candy shop owner for lollipops to give out to customers, to put it simplistically.
Some may prefer this approach because it allows you to get to know the person/business you’re bartering with, as well as build relationships in the local community. This could come in handy if you need extra office space on occasion, for instance. Or maybe you know an attorney nearby that can answer a simple legal question without charging you hundreds of dollars, because he or she needs your printing services.
The disadvantage is that you may not have access to as big a range of services, and you have to do more of the groundwork yourself.
Although you’re not exchanging money, the IRS states that “you must include in gross income in the year of receipt the fair market value of goods or services received from bartering.” This is typically reported on the Form 1040. HBM
Andy Roe is the General Manager of SurePayroll, Inc., a Paychex Company. SurePayroll is the trusted provider of easy online payroll services to small businesses nationwide. You can follow Andy on Twitter @AndrewSRoe.