When developing your terms and conditions don’t forget the potential for BARTERING!

September 29th, 2011

There is more than one way to skin the proverbial cat when it comes to payment terms.

According to Wikipedia: Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money.[1] It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, such as when the currency may be either unstable (e.g., hyperinflation or deflationary spiral) or simply unavailable for conducting commerce.

There are a number of companies that primary business model is to use bartering in part as their engagement model. Although the model is slightly different at each organization, the general theme is that a company can trade excess inventory for just about any category and receive credits that can be used in part to buy or acquire other products and services that they need for their business. An example might be to consolidate and eliminate backroom stock in retailer’s stores in exchange for credits and use those credits to buy supplies that are regularly used such as paper or plastic bags etc. This process can also have a positive impact on shrink as well as preserving cash.

A unique use of this process that I recently read about in the Arkansas Democrat Gazette discussed a company agreeing to pay for building renovations if they had their current contract extended. The article by Debra Hale-Shelton titled UCA trustees call off audit of vendor bid. The legality of this transaction is in question, but it is in fact a form of Barter.

If you are going to consider barter as a payment or terms option, make sure you understand its use and that it is an above board part of negotiation that is well defined in your terms and conditions.

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