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As the economy slows down and money is tight, a smart business owner will find a way to get rid of extra merchandise that they don't need and acquire merchandise they need. The most productive way to accomplish this is through trading merchandise with other businesses, also known as bartering.

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.

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 products will be sold at full retail value through the exchange. Since no discounting occurs you retain the full value of your goods and services, which is also good for increasing the productivity of your business as downtime and unused capacity are changed into credits in the exchange.

Another great thing about joining a barter exchange is that your business will actually be marketed to the other members of the exchange. Just think, it's like free advertising or having another person on the sales force. And once the members decide they are satisfied with your product or service, they may refer other people to your business which will increase your customer reach.

You need to be aware however, that just because there is no actual cash changing hands, it doesn't mean it isn't taxable. Bartered goods and services are treated similarly to cash transactions under U.S. tax laws. You will receive a Form 1099B to use to prepare your income taxes and you must report this income on your return. But don't let this minor detail deter you. The advantages and benefits of using bartering far outweigh any of the inconveniences.

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.