Business bartering is not a new process, but it has enjoyed a significant increase in online popularity in recent years. Businesses of every size, from virtually every industry, and with a huge array of goods, services, and assets have entered deals with similarly-minded organisations with an offer of their own. The resulting deal can help a business to expand, help it clear unneeded stock, improve or begin relations with potential business partners, and help to grow profits. Fortunately, brokers exist that can help ensure the deal is beneficial for both sides, and goes smoothly.
In a straight contra deal, no money changes hands, but there are some deals where two parties offer goods or services of a different value. In these cases, money may be included as part of the deal, and the services or goods may be considered a means of lowering the amount of cash that is required to change hands.
Using a broker, or a business branding platform, helps ensure that a business is able to find another party that is willing to trade. This negates the need for businesses to have to contact other parties and determine their willingness to trade. Some of the most effective trades come between those that have an existing working relationship, but a contra deal can be used to help forge new relationships too.
Although small and new businesses are those that tend to have less cash flow, and are therefore more eager to enter into a contra deal arrangement, big businesses can enjoy the same benefits but on a much larger scale. A deal was recently forged between three of the largest pharmaceutical companies, Novartis, GlaxoSmithKline, and Eli Lily & Co. This deal would have cost billions of dollars for each company, in cash, so there is no upper limit.
Just because cash doesn’t change hands in a contra deal, however, you should not overlook any VAT or tax liabilities that arise from the exchange. VAT needs to be paid as though cash changed hands in the deal, and it needs to be properly accounted and put through the books.
Contra deals can be mutually beneficial, and they can help forge relationships – well worth consideration by businesses and entrepreneurs of any size.