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As the economy slows down and money is tight, a smart business owner will find a way to get rid of extra merchandise that they don't need and acquire merchandise they need. The most productive way to accomplish this is through trading merchandise with other businesses, also known as bartering.

This is the most ancient method of doing business. No money is needed. I have what you need and you have what I need. We trade one sheep for one goat. In the modern world it doesn't work quite that way. I need a computer; you need tires for your delivery vehicle. I sell advertising and you sell pizzas. This is where bartering for business becomes an advantage of the savvy barter network members.

For this reason, smart business owners will join a barter exchange. A barter exchange serves as a clearing house for each of its member companies, something like a bank. Each barter exchange will track its clients' credits and debits as they barter goods and services with each other. Such exchanges charge a fee to join, a fee to maintain membership each month, and usually ask for a small share of each transaction to maintain their operations.

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 advantage to joining a barter exchange is other members will see your business. Your business will be advertised for free. Also this is similar to hiring an extra person to sell, but you don't have to pay anything for it. If the other members like what you have to offer, they will tell their friends and they will probably end up being cash paying customers.

The business owner should be aware of the tax consequences of barter. Barter income must be reported on the yearly tax return. Although no cash is exchanged, the goods and services exchanged in trade are treated by the IRS as cash transactions through IRS Form 1099B, which is business members received at the conclusion of each fiscal year. The tax, however, is a small price to pay for the additional revenue accrued through the extra business available on barter exchanges.

A barter exchange is an appropriate move for most businesses. If the business is a newly created venture then it can be extremely profitable both in the ways of cash and other needed goods. It can also help to obtain services that a start up or small business would not normally have the money for. Larger businesses can use this system to lower their inventory.