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As the economy slows and cash flow tightens a savvy business owner will look for ways to reduce excess inventory and get needed products and services without the outlay of scarce cash reserves. The best way is to trade with other business. In other words: barter.

This method has been around since the beginning of time. You don't need cash if I have what you want and you have what I want. In the olden days, people would trade an animal such as a sheep or a goat. In this day and age, it is different because it is modern times now. I might be looking for a computer and your delivery vehicle might need new tires. I am in the advertising business and you are in the pizza business. This is how bartering for business becomes a smart move for all of the people involved in the trade.

That is why savvy businesses owners join a barter exchange. These are organizations that act as clearing houses for their member businesses. The barter exchange is almost like a bank, keeping a tally of the credits and debits as each member barters with other members. There is usually an initial membership fee and monthly fees. Plus the barter exchange will usually require a small percentage of each transaction as an operating fee.

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 smart business move for most businesses. It is an especially great boost for a startup business which may be cash poor. Your customer base can be increased and goods and services obtained while initial capital is preserved. Established businesses also benefit with an expanded customer base, increased sales and reduction in excess inventory.

When business is slow and the flow of money decreases, business owners must consider how to get rid of the products that are not selling and how to obtain more of the products that are in demand. One option is for the business owner to join a barter exchange. This exchange serves as a broker for businesses to exchange and trade products and goods. Money is not needed, when you are bartering for business you only exchange some product for another product that someone else may need. This type of barter system can work well for most businesses.