Barter Beats Bills
Sun Herald
Sunday November 9, 1997
IT might be a case of back to the future, but increasing numbers of small businesses are bartering with each other, often cutting their overheads in half.
Some are even rewarding themselves with a holiday.
The new twist to bartering or swapping your produce for somebody else's - the oldest form of commerce, pre-dating money - is high-tech computing which produces a hybrid where cash, cheques and credit cards are replaced by "trade dollars".
The biggest barter central registry is Bartercard, which oversaw $246 million worth of barter transactions in the year to June 30.
It started on the Gold Coast six years ago and has expanded into New Zealand, the UK and Sri Lanka and plans to set up in Thailand and Hong Kong in the new year.
The Bartercard system works like an exclusive, if expanding, club - businesses within the loop trade with each other using trade dollars credited or debited to their Bartercard account.
Their names appear in a directory and one of the spin-offs is the referrals that the contacts generate.
The two advantages cited over and again by proprietors contacted by The Sun-Herald were that bartering had all the benefits of networking while conserving cash flow.
A travel agency, which admittedly had the advantage of being the only one listed in the directory, earned enough trade dollars over five years to pay its accountant and solicitor and have all its brochures printed on Bartercard.
The proprietor of Trade Travel, Kay McGlashan, says the volume of business from Bartercard is "huge", describing it as a "captive audience".
"It just snowballs," she said. "You get good business contacts and more cash flow for the business is created."
She added that with the typical cash/cheque economy "it is easier to spend and harder to make money", whereas she found that with bartering "it is easier to make money than it is to spend".
The paradox of generating more cash by using less of it turns out to be the secret of Bartercard.
It's because, as a closed loop, everything you pay for eventually comes back to you in a chain reaction as debit trade dollars are converted into credits.
Every time you spend something you know you have automatically generated new business some time ahead.
Bartercard's managing director, Andrew Federowsky, says: "Although you pay the ticket or market price for the goods and services, you are actually paying for your purchase with your own inventory, which costs you wholesale."
At the same time, cash is being conserved for other uses. It is a way of carrying your mark-up right through: you get it on what you sell and save it on what you buy.
In effect, you get professional services at wholesale prices - you pay the normal charge but because you are trading in your own produce or services the true cost is cheaper.
"Costs such as accountancy fees, solicitors' bills, courier services, computer training, vehicle maintenance, contract cleaning and rubbish removal can be offset by between 10 and 50 per cent through trading," Mr Federowsky said.
"By using trade dollars rather than cash wherever possible, members can reduce the cost of their overheads.
"This conserved cash can then be reinvested elsewhere, perhaps back into the business or used for that well overdue holiday," he added.
An accountant member of Bartercard, Alan Mason of Rousetty and Co, did both. "You are buying with your own labour so the cost isn't so high," he said.
"Say I buy a new computer for $5,000. My true cost is 50? in every dollar, so I'm cutting my overhead costs in half. His lifestyle "has improved dramatically" since he started bartering and he now takes holidays using his surplus trade dollars.
© 1997 Sun Herald