BARTER TRADE has been in existence for centuries now. It is a form of trade where products are exchanged without the involvement of money. Today, modern businesses are still using the barter option. This is where two or more parties agree to exchange services, products or expertise and there are no costs involved. It is important, however, to understand that this option is still taxable by IRS, hence the need to make all proper considerations. Below are some of the rules you should consider when selecting this option.
First and foremost, it is imperative that you never cut into your profits. This is a mistake that haunts most people as they trade. When exchanging the products and services, make sure that you do not incur losses in the process. The best way in doing this is to counter the value of the product, service or expertise you will be getting in return. Compare the two with what you will be exchanging and determine whether it is worth it or not. However, it is important to understand that the profit margin in barter trade will not always be as high, but this does not give you the right to do a fire-sale.
Second, you need to know your limits. At times, the barter option can be addictive as it requires a certain level of intelligence and skill. This is what has seen most investors concentrate solely on the option. As aforementioned, the profit margins in this option are not as reliable. This is why you need to always take time defining your barter limits. It is not all the time that you should be exchanging products and services. The only time that you should engage in this practice is when it is necessary or advantageous to your business or bottom line.
Referring back to the latter point, you need to make sure that you really need the option. Barter trade is a painless option but it makes no sense if you don’t need it in the first place. To succeed with this option, you will have to look at what you will be getting from it and ensure that alternative options are not as reliable.
When trading, it is important that you select the products and services that are applicable for you. In simple terms, the exchange should benefit all parties involved. The worst mistake that you can make is that of taking up an option without considering the end results. This will only lead to regrets in the end. Make sure that the exchange product is relevant for you before opting for it.
Proper record keeping is paramount. As aforementioned, barters are taxable. To avoid complications, you will have to keep proper records to know what you owe. This will keep you from incurring undesired expenses and penalties at the end of the day.
Lastly, in all that you do, keep the barter trade legal. This is the only way you will be able to keep your business from undesired regrets in the future. Send the proper contracts to the Internal Revenue Service and never trade anything that is illegal.