The word itself might sound old-fashioned, but bartering is one of the most effective ways for businesses to streamline their cash flow. For small businesses especially, this is highly desirable, as these companies are often operating from invoice to invoice; anything that can be done to operate outside of a cash economy has the potential to enhance their profitability. So how does bartering work, and what does modern barter mean for businesses?
Cash flow liberation
The business world runs on capital. Every business relies on the income they generate to operate, no matter what industry they’re working in, and businesses live and die by their bottom line. In order to expand and grow, businesses need to have sufficient capital; staff training, new premises, new stock and new equipment must all be sourced and paid for within the cash economy, so a business’s access to capital determines whether it can succeed or not.
When capital is so vital to a business’s success it’s essential that it’s only used when absolutely necessary. If businesses can source assets without dipping into their reserves of capital they’re able to secure opportunities and operate more effectively, which is where bartering comes in.
What is modern bartering?
Modern-day bartering is virtually identical in concept to its original form; swapping goods directly, rather than using cash. This has the advantage of allowing businesses to swap unnecessary assets and goods for much-needed equipment, and enables them to save their cash for other expenses. The trouble is, of course, that different assets are worth different amounts to different people; what’s incredibly valuable to a mechanic might be completely worthless to a painter, for instance. Because of this, bartering has been historically superseded by cash, which enables goods to be purchased and exchanged easily through a monetary medium.
However, modern technology has revitalised the concept of bartering. While finding a viable trading partner used to take lots of hard effort and research, online bartering marketplaces allow businesses to quickly find partners across the country. Because of this, it’s easier than ever for businesses to make the most out of bartering by finding the people who have what they need and are willing to trade for it.
No business can operate solely on bartering, but it’s an incredibly useful tool in the right situation. A business that can cut back on its capital expenditure by bartering effectively gains an edge on the competition, and stands a better chance of succeeding in the ever-competitive UK economy.