Companies in barter

Barter can be readily applied to all types of businesses seeking to improve their inventory management of tangible products as well as intangible services. Given the advancements in geographic reach and scope, as well as expanded network capabilities and currencies, it's relatively easy for companies of all sizes to become involved in the barter process. Throughout the U.S. and Canada, this has evolved into the Barter Association National Currency (BANC), which has become the standard monetary exchange unit for more than 75 national barter networks. Through their NATE membership, these independent trade exchanges have come together to create the most accepted standardized international barter currency in the world. This offers tremendous inventory management flexibility to companies of all sizes.

Theoretically, any company can barter to its advantage if the network offers products or services the company requires and if there is a demand for the company's products or services in the network. Some companies may be particularly well suited to barter; the best candidates are those with High T&E costs. Restaurants, hotels, stadiums and even some airlines barter because they have excess capacity in the form of empty seats and rooms that can be traded for products and services for which they would normally pay cash. However, T&E taxes and gratuities must be paid in cash. Conversely, barter exchange network clients with high T&E expenses can benefit because of the number of travel and hospitality choices available. This includes companies that offer travel incentives to high performers.

Products and services needed by hospitality firms. Companies that sell or repair furniture, plumbing, air-conditioning and heating systems, and those that cleaning, painting and other services needed by restaurants and hotels, find their products and services are in high demand in the network.

Excess inventory or capacity. A company with excess inventory should consider barter before liquidation because barter offers the opportunity to sell at full price. A plumbing wholesaler with 500 faucets might earn trade dollars from a Caribbean resort that would happily take such an item in quantity in exchange for vacant rooms that still another client in the network might use for a company retreat. Companies with excess capacity are barter candidates because capacity can be turned into extra business--business that costs the company only the direct costs of producing their goods and services.

Seasonal fluctuations. For some companies, barter may not be beneficial at certain times of the year. A furrier, for example, may be too busy in the fall and winter seasons but during the slow spring and summer, when inventory still on hand is moving slowly and cash flow is light, barter business probably would be welcomed.

A new product or service. Barter can be used in several ways to lower the risk of introducing a new product or service--in test marketing, for example--because it costs nothing in promotional expense other than barter exchange fees. In addition, the direct cost of promoting a new product can be offset by trading the product or service for advertising through the network.

Departments

As organizational specialization increases, the research also indicates that the approval level for barter and countertrade transactions rises. Firms with either a barter/countertrade department, or a trading company subsidiary, limit clearing authority to major corporate officers, e.g., chairman, president, or vice president for international marketing. Firms handling such transactions through the export department or international division generally delegate authority to lower levels, although in both contexts the extent of delegation apparently varies in relation to the value of the transaction.

Presently in international trade, an exporter may be asked to accept payment in merchandise rather than cash (barter). Moreover, in other situations, such as compensation arrangements or switch transactions, both export and import transactions may be involved. Such transactions give rise to unique documentation and procedural problems. First, the U.S. company having a role in such a transaction should not try to use its standard-form sales or purchase documents. These transactions require special terms and conditions to protect the participant and should be specifically tailored to the transaction. Second, even though no money will change hands, the parties should value the merchandise or services that will be exchanged. This will be necessary for tax, customs, and foreign exchange control purposes. The U.S. Customs Service recommends that the parties seek an advance ruling. In most countries, attempts to engage in barter transactions for the purpose of avoiding these laws will subject the participants to prosecution for evasion. Correlatively, the participant should satisfy itself that all necessary government notifications and forms are filed, just as if it were a cash transaction, and that all values stated are accurate, consistent, and supportable.

Date: 2015-12-24; view: 884