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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.

It is the oldest means of conducting transactions. No currency changes hands. We each have what the other needs. We trade a horse for a cow. Nowadays, things operate differently. I require a laptop; you require a set of tires for your delivery van. I deal in marketing and you do professional printing. So you can see there is a definite benefit to network bargaining for commercial purposes.

This is the reason clever entrepreneurs enroll in a barter exchange. Such groups serve as clearinghouses for the companies that belong to their service. They are like banking institutions, keeping track of credits and debits as members trade with one another. They generally charge a start-up fee and expect a payment each month thereafter. Also they get a minimal commission on every transaction to cover their expenses.

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.

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.

One caveat: the fact that actual cash is not exchanged has nothing to do with tax consequences. In the eyes of the IRS, barter of goods and services are considered as if they were cash transactions. At the end of the year, all member businesses receive IRS Form 1099B. All income, whether from cash transactions or barter, must be reported on your yearly income tax return. There are advantages to barter transactions, which are useful business services providing you with more control over your cash and inventory, and these advantages are worth the small price you pay in the form of tax on barter income.

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.

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.