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To read some of the business publications, you'd think that bartering was a whole new phenomenon, or at best a fringe element of the business community. On the contrary, bartering has been around as long as business itself - even longer, in fact, since it was common in pre-monetized societies for a man to swap the product of a successful hunt with a neighbor who had extra tools. And in modern times, there isn't a single kid alive who, while working in that first fast-food job, hasn't swapped his own employer's burgers for a bag of tacos made at the stand down the street.

As sophisticated adult business people, we would naturally be inclined to look for something more substantial than our next meal in our bartering efforts, but for too many business people, bartering is a foreign world, and they haven't yet found reason to learn the language or understand the currency. Perhaps a look at the scope of the barter phenomenon will provide that incentive. According to the International Reciprocal Trade Association (IRTA), almost half a million businesses participate in barter via barter exchanges. There are approximately 600 such exchanges worldwide, of which approximately 100 are members of IRTA. IRTA estimates that the global total of barter transactions by participating businesses was $12 billion in 2009/2010, and that the volume is expected to increase by 5 to 10% in 2011. Why, in just a few years, we'll be talking about some real money!

Of course, such volume couldn't be realized if the bartering process was limited to a simple exchange of two neighbors, and it is doubtful that a single nearby business would have exactly what a nearby business would need, in the exact amount to produce a mutually and equitably beneficial exchange. And that is where an organization such as IRTA comes in. Not only are members bound to a clearly-defined set of business standards and practices, there are progressively higher levels of certification to which members aspire, both of which serve to establish and enhance the viability of the barter process, as well as the credibility of the participants.

Quite simply, as a member of a barter exchange, a business provides goods or services in exchange for a predetermined universal currency, which can subsequently be "spent" purchasing goods or services from any other member of the exchange. For example, if one of your company's departments experiences a reduction in workload, you might offer the services of your idle workers to another company that is faced with a temporary manpower shortage. With the exchange credits you earned, you might find yourself subsequently purchasing capital equipment items that another member business had for sale, but for which you had not budgeted capital expenditure. It is quite likely that cash flow challenges provided the initial impetus for establishing barter relationships, and it is certainly true that those same challenges have been responsible for the rapid growth of the industry.

As would be expected, the United States Internal Revenue Service (IRS), defines Barter Exchanges as third-party record keepers under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). TEFRA requires that exchanges are subject to (IRS) Form 1099-B reporting for the annual gross barter sales of the exchange's members. In addition to the necessity of tax reporting specific to the requirements of a barter exchange, individual member businesses also assume responsibility for incorporating the universal currency into their internal record-keeping parameters. This effort is not as complex as it might seem, and would actually be second nature to any business that operates internationally or otherwise accepts foreign currency payments.

Is bartering a good fit for your business? That is something only you can decide; just make certain your decision is based in a full awareness of the pros and cons of the barter process. There is a questionnaire on the IRTA website that is designed to help you determine whether barter is right for your business, though it is understandably geared toward encouraging additional members, as well as answering their questions. IRTA Questionnaire.

For more detailed information about IRTA, check their website at http://www.irta.com/

For more information on IRS definitions, regulations, and reporting of barter transactions, visit the IRS page Barter Exchanges.

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