Cash is liquid. Is barter?

We know that when we consider the liquidity of an asset cash is number 1. Of course the flow of that liquid is generally out. Like water running downhill cash goes out of the business with ease, it’s getting that liquid uphill and into the business that requires ingenuity.

Barter is different. Finding a buyer willing to purchase your goods or services using barter dollars is not difficult. After all who doesn’t want to purchase something with little to no cash out of pocket?

So barter can flow into your business with ease, like water running into a valley, but getting it to flow up the valley wall to purchase what you need for your business can be a challenge. After all not everyone participates in organized barter.

Although a barter dollar or trade credit is taxed the same as a US Dollar you cannot pay your taxes with barter dollars. The descrepency between a barter dollar and a cash dollar is obvious; cash is easier to spend and more difficult to acquire while barter dollars are easier to acquire yet more difficult to spend. This is due to the fact that not everyone will accept a barter dollar as means of payment for goods or services rendered.

What does this mean for the trader?

Well the first thing it means is that in order to barter successfully you must have a plan. You should know how and where you will spend you barter dollars before collecting large sums. You need to account for the less liquid state of the barter credit and adjust your plan accordingly. Rather than looking in your barter account with thousands of credits and calling your broker asking for x y or z. Call your broker and find out what is available, if you find something that you want or need, then proceed to sell your goods and services to purchase that item.

Another option is the barter credit line. Some barter companies offer their clients a credit line. This can be a valuable tool in properly utilizing barter. Remember barter and cash are different, and remember how. Barter credits can be harder to spend yet easier to acquire. So credit lines can be used more liberally in the barter world due to the fact that getting the credits to pay them down would be easier that getting cash to pay down a cash credit line. Look for interest free barter credit lines for an even better solution.

Also remember that the goods or services that you are interested may not always be available in your barter system so use your credit line to make the purchase while you can. Then work with your exchange to market your offerings to the barter network being sure to note before hand the amount of barter work your business can handle in a given month.

Barter and cash are similar in many ways and they differ in many ways. Understanding how barter and cash differ in liquidity can help immensely in successfully utilizing barter to benefit your business.