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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 is the most ancient method of doing business. No money is needed. I have what you need and you have what I need. We trade one sheep for one goat. In the modern world it doesn't work quite that way. I need a computer; you need tires for your delivery vehicle. I sell advertising and you sell pizzas. This is where bartering for business becomes an advantage of the savvy barter network members.

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.

The exchange sells your products at their full retail value. Since your products are not discounted, there is no loss of value of your goods and services. Thus, business productivity is increased while downtime and reserve capacity is reduced by conversion to credits within the exchange.

Joining a barter exchange also allows you to market your business to other members. It's the same as getting free advertising or having an extra sales person on staff. If they determine your services or products are useful, exchange members will not only refer their business to their friends, but will probably also become your cash customers.

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.

When you sign up for a barter exchange you are making the right move to improve your business. This is especially helpful to beginning businesses that might not have enough money. This way they can have more customers and more merchandise while keeping the same amount of capital. Even, businesses that have existed for awhile can get benefits with a barter exchange and increase their customers, make more sales and get rid of extra merchandise.