A Little Bit of This for a Little Bit of That

As the person in charge of your home based business, you have a lot of freedom to choose how you do business. What you may not realize is that this freedom enables you to accept payment for your products or services in a form other than cash, check, or credit card. Bartering goods and services can be a useful tool for your business if you do it correctly.

One of my home based businesses is selling baked goods at local farmers markets. On any given week, there is a lot of bartering going on amongst the vendors at the markets. It makes sense for us to barter, since produce, baked goods, and most of the other items that we sell at the markets are perishable. Instead of going home with all of the cupcakes, brownies, and cookies that I was unable to sell that day, I often go home with eggs and vegetables that I have received in exchange for some of my baked goods.

It is easy to see why farmers’ market vendors are inclined to make bartering a common business practice, but you would be surprised at just how many different businesses can make bartering work for them. The deciding factor is usually one of economics. Are you able to work with the other party to decide how much of your product or service is equal to what quantity of their product or service? At the farmers’ market, it is simple because we each have prices for the items that we are selling. This makes it easy to calculate how many cupcakes I would trade for a dozen eggs or a bag of salad greens.

However, if you provide a service such as bookkeeping or typing, you can translate the value of that service into just about anything because you already have an established hourly rate. If a potential client would like to use your services, but is not sure if they can afford to do so, ask them whether they provide any goods or services that you may be interested in bartering. Then, ask what their rate or price is for those goods or services and see whether a trade would make sense. If so, you may have yourself a new client as well as something else that you wanted or needed.

Since bartering is an exchange of items that have value, the goods or service that you receive in trade are considered income. Since they are income, you must keep track of them for accounting purposes. If you are bartering with an accountant, they will know what to do with them at tax time. If not, I believe that they go on your Schedule C, but please check with your tax provider, as I am not an accountant and am not qualified to give tax advice.

Do you barter in your small business? What have you traded?

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