So, what about bartering your service?

Ever done a ‘contra’ for services rendered? Swapped something you have for something you want? Then you are already familiar with the concept of bartering.

Bartering is not a new concept and has been traced back to Roman times, however some entrepreneurial individuals have capitalised on the concept in modern terms, and franchised it over the years.

Shane Drew has been involved in the sign industry since 1992. Before that he had a very successful career in sales, winning several Sales Awards before deciding on a career change in his early 30’s. Shane has been writing freelance articles since 2002 and is a sign industry mentor for sign shops both in Australia and Europe, is a regular contributor to Europe’s biggest sign industry forum, and is well known in local circles for his passion about the Australian Sign Industry. Shane is Managing Director of Drews Sign It Pty Ltd, a family business who are supporters of several major charities and not-for-profit organisations. A recent highlight is his appointment as a Green Guardian for his support of Currumbin Wildlife Sanctuary, on Queensland’s Southern Gold Coast.

You don’t have to look too hard to see organisations that specialise in administering various ‘modern’ barter systems. Well known ones include Bartercard, BBX, Empire Trade, Contrabart, Tradebart, Mumswap, Smarter Barter… the list is endless.

So is it any good? Will it work for me?

The short answer is… maybe.

The modern barter concept works very well during depressed economies like the GFC that we have all recently experienced. Prospective clients are strapped for cash in the real economy, but can easily generate Trade Dollars ($T) because there is nearly always a demand for services that do not involve cash.

The system can be very good, but it can also bite you if you are not alert to the scams that crop up from time to time.

Unfortunately, some see modern bartering as a tax dodge. It is not, and never will be. The Australian Tax Office (ATO) see it as a legitimate form of currency, as do most of the major banks when they wish to see your turnover figures. Receipts and invoices should still be generated and treated in the same way as any other sale or purchase.

Therein lies one of the problems of the modern bartering systems.

Some business see nothing wrong with charging double or triple their cash price for their products and/or services in the barter economy, citing the argument of supply and demand. The higher the demand for bartered goods and services, and the less supply, equals a higher selling price.

This is however against the principals and morality that is modern bartering. Most barter networks combat this with getting large numbers of members in the same field. This is not overly successful, as if one member knows his opposition are charging high, he’ll no doubt raise his price too.

It is worth noting that it is also illegal from the ATO’s viewpoint. The ATO view this as fraudulent because you are inflating the cost of goods and/or services for barter clients, and not cash clients, thus giving you the situation that will get you a larger gst rebate claim on bartered goods. They will very likely audit your books to see if it is a regular occurrence, and if it is, you will have a lot of explaining to do.

Some like to charge 50% Cash and 50% $T. This is also against the rules for some barter networks, but others do allow % deals. In most cases though, if you sell 50/50 then you can only buy 50/50.

In simple terms, modern barter systems are no different to a credit card account. Viewed in that manner it can work well. 

From a retailers perspective, modern bartering can cause you a bit of grief if you don’t stick to some serious limits.

Bartering works well if the items you are selling have good profit margins. Anything with a high labour content is also a good barter sale.

However it is a good idea to limit your barter to 15% – 20% of your monthly income. Anything above that will likely wreck your cash flow.

Most traders will only sell at retail prices because when they come to buy something on trade, they’ll be paying retail as well. It maintains the value of their $T. Discounting a sale effectively discounts the value of their $T.

Remember too, you also pay fees on each sale, usually in cash.

So, we have touched on some disadvantages…. Are there any advantages?

Yes, there are.

If you are having a ‘dry spell’, doing a modern barter job will at least get you out to earn some income, albeit in ‘funny money’. But that can be spent within the barter network, so in that sense it is still currency worth having, when no cash is around.

It also gives you the opportunity to get a new product or service ‘off the ground’. Your business may wish to expand into a new area, and offering that new service to the trade network is a good beginning. That gets you out and gets your product in the market, getting the ball rolling relatively quickly in most cases.

The networking value of bartering should also not be underestimated. Generally you’ll find most barter groups are excellent network opportunities. Getting to know those close to you in the network is always a good idea.

You don’t have to be a member of a barter network to get the benefits of a network though.

Traditional bartering, as opposed to modern bartering that is administered by franchised businesses, can be engaged between two businesses at various levels. It is also a great networking opportunity.

Many years ago, an Australian airline tendered for coffee suppliers. Of the two tenders that were short listed, they accepted the dearest one.

Why?

The attractive thing to the airline was that the winning tender included part payment of the account in airfare credits. The airline saw an opportunity to barter some of the costs, and jumped at the opportunity. An airline seat would be cheaper than spending cash for obvious reasons. It reduced the airlines spending of operating capital, and they used seats that may or may not have been empty anyway.

Personally, I have bartered plenty of services I’ve required. I recently signed a pest control van, and he paid me by treating my house. The best part is that the pest control van has got me other cash work, so it has been very profitable in that respect.  I’ve also purchased more expensive services, and used my signs as a part payment.

Whilst I’m not advocating any particular network, traditional or modern system, it may be something that we could consider if we are looking to fill some quiet time. From my own experience, a lot of small businesses are open to exchange or barter their service for others, all you have to do is make the suggestion.

Often it is a case of thinking outside the square.

Be careful to document everything though. Its not about avoiding your tax obligation, but it is about saving your operating cash.

Done right, it can be good for business.

Please feel free to send your comments to  [email protected]

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