BUSINESS

One-On-One Barter Vs Multilateral Barter

Friday 26 February 2010, 8:59AM
By Terry Cuthbert
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Barter is the method of trade in which goods or services are directly exchanged for other goods and/or services, without or with minimum use of money. Historically barter operated instead of money as the primary method of exchange. This also occurred throughout history in times of monetary crisis, when a currency was unstable, or devalued by hyperinflation or recession. Nowadays, however, barter is a major force in the economic world. According to a recent article in the Wall Street Journal about 250,000 North American companies conducted barter transactions worth more than $16 billion in 2008. These numbers speak for the importance of barter today.

Barter can be bilateral or multilateral, and usually exists parallel to monetary systems in most developed countries. Although companies do bartering one on one, many deals are conducted via membership networks in barter companies, trade associations or commerce networks; where technology and tracking software have modernized the centuries-old system.

Advantages of using multilateral barter or barter exchange commerce over a direct or bilateral barter are many.

Multilateral barter is more complex to settle but allows trades that would not be possible with bilateral barter.

Bilateral barter is only possible when there is a coincidence of wants between two businesses. For a bilateral barter to take place it’s necessary that each party must be able to supply something the other party demands. This is not always likely to happen. Imagine you are a bookstore and need wooden shelves for displays and want to barter books for the same. But it will be quite unlikely for you to find a carpenter or a wooden furniture distributor who will like to trade for your books.

In multilateral barter, exchanges do not need to be direct. Instead three, four, five and six-way transactions are possible. Transactions can also take place at different times so no single supplier needs to “swap” their product or service immediately but can do so over a period of time. In these instances the value of the deal is recorded centrally and the process managed by a commerce network or barter exchange organisation.

Nearly every business faces the problem of cash flow management. Issues that contribute to the need for cash flow management include highly competitive markets where constant advertising is a mandate, increasing business expenditures to attract consumer attention, planned or unplanned downtime, perishable inventory and the necessity of discounting inventory. Modern, multilateral barter helps businesses alleviate the affect of these problems.

Commerce networks develop a system with a virtual value unit ("barter dollars," for example) to measure and balance exchanges, very similar to a monetary system. These commerce networks exercise controls that prevent exploitation by any participants involved or of any participants involved.

A commerce network system helps remove the limitations that traditionally were a part of any barter transaction, such as the need for an equal dollar value, the mutual need between any two companies for each other's product or service, and the time it can take to coordinate the transaction.

With advancements in computer technology, the concept of a bartering system emerged as a means by which business-to-business barter could take place between many businesses simultaneously, greatly increasing the benefits of trading without cash.

Hence, a commerce network helps provide strategic planning, precise implementation and monitoring to the centuries old concept of bartering.

BarterZone Ltd here in New Zealand has four types of membership each designed to allow you to be in control and or to have a BarterZone dedicated trade broker. The different membership options are explained in the link below.

www.barterzone.co.nz/accounts.php

BarterZone will look at your network of suppliers and consumers and put together a plan that will help increase your turnover and give you more cash retention.

Terry Cuthbert

terry@barterzone.co.nz

www.barterzone.co.nz      www.barterzoneproperty.co.nz