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When times are tough, and companies filled with overflowing warehouses, a smart executive will try and discover alternative methods of dealing with the problem. One method is to exchange your excess goods for services from other companies. This is the original form of commerce: barter.

It is the oldest means of conducting transactions. No currency changes hands. We each have what the other needs. We trade a horse for a cow. Nowadays, things operate differently. I require a laptop; you require a set of tires for your delivery van. I deal in marketing and you do professional printing. So you can see there is a definite benefit to network bargaining for commercial purposes.

This is the reason why smart business owners join a barter exchange. These organizations are like a clearing house for the businesses that are members of the barter exchange, similar to a bank, maintaining a running tally of both credits and debits as the member businesses barter with one another. There is usually both a monthly fee and an initial membership fee, the barter exchange will also likely charge a small percentage fee on each transaction for operating costs.

Your merchandise is for sale through the exchange at full price. The other person does not get a discount and you will receive the right amount of money for whatever the product is worth. This is good for business. The amount of time spent in downtime and unused capacity are decreased and transferred in the exchange and credited to your account.

The other benefit of joining a barter exchange is that your business is marketed to the other members. It is like receiving free advertising or having an extra sales person. Once they find your services or product usefule, members of the exchange will refer your business to their friends and will likely become your cash customers as well.

The business owner should be aware of the tax consequences of barter. Barter income must be reported on the yearly tax return. Although no cash is exchanged, the goods and services exchanged in trade are treated by the IRS as cash transactions through IRS Form 1099B, which is business members received at the conclusion of each fiscal year. The tax, however, is a small price to pay for the additional revenue accrued through the extra business available on barter exchanges.

Joining a barter exchange is a wise choice for the majority of businesses, and is especially beneficial for cash poor startup companies. This service helps to increase your customer base, and help you obtain goods and services while preserving capital. Established businesses can benefit from the exchange as well, through an expanded customer base, increased sales and a decrease in excess inventory.

Using a barter exchange is an excellent way to enhance business. Consider the farmers of long ago who traded a cow for the neighboring farmer's chicken eggs. Trading in this manner has proven over the ages that the trading of products and services can be beneficial to all. Bartering for business has some costs such as transaction and start up fees but the overall benefit is incomparable to the ultimate gains such as reducing inventory, overhead costs, and essentially receiving free advertising. Just remember that U.S. tax laws still apply and you will need to report all income.