Barter System Revival

     During this economic recession, small businesses are looking for ways to overcome the credit crunch and improve their cash flow.  
     Many of them are turning to an ancient form of trade with a modern twist…barter… which appears to be booming.

Sales clerk Luis Sanchez, center, smiles as he checks out a customer at a Costco warehouse store Thursday, May 8, 2008, in North Miami Beach, Fla. Consumers gave some of the nation's retailers a little relief in April after months of dismal sales, gravitating toward less expensive discounters and wholesale clubs but generally still shying away from stores selling clothes and other non-necessities. (AP Photo/Wilfredo Lee)

During this economic recession, small businesses are looking for ways to overcome the credit crunch and improve their cash flow.
Many of them are turning to an ancient form of trade with a modern twist…barter… which appears to be booming.
At The Killer Baking Company in Northern California, where they say the brownies are "to die for," the baking is done inside an oven...bought through barter.
Michael Garzouzi, Killer Baking Company Owner says, "Not only did I save on the price, I also saved because I'm basically paying for it with my brownies."
Garzouzi conducts 30-percent of his business through barter which is traditionally when two parties exchange goods or services instead of paying cash.
"It does reduce my costs a great deal. Because basically when I'm buying something, I'm buying for the costs of my goods," said Garzouzi.
Garzouzi is among three-thousand small business owners who've joined the barter exchange "International Monetary Systems", known as I-M-S, this year. It's a members-only, on-line 110-million dollar-a-year marketplace. But the sales are not directly from one business to another.
Here's how it works. When a business makes a sale, it earns virtual trade dollars which can be applied to the purchase of any other member's products or services.
Garzouzi says, "I might sell somebody a box of brownies, but that doesn't mean I have to get their product. I can take that money from that account and buy a different product somewhere else."
Don Mardak, President, International Monetary Systems says, "We bring you new customers."
I-M-S and a rival barter exchange known as ITEX, pocket a 6-percent commission from the buyer AND seller in every transaction. A fee, businesses say, that's worth it, given the built-in discounts.
Mardak says, "You are buying the dental work, the jewelry, or clothing and furniture at a wholesale price -- the wholesale cost of your product."
New York florist Richard Salome barters for dental care for himself, his wife, and their employees. He also trades for the gourmet chocolates in his gift baskets.
Salome says, "It’s a heck of a lot easier. It's like going to a restaurant and saying 'I'll take this, this, this and this' and walking out; all you got to do is leave the tip."
This mom and pop flower shop also barters for its business cards and shipping labels...and once, even, for plane tickets and a hotel room to a flower auction...in Holland.
"It gives us a better 'cash flow' than we wouldn't otherwise have,” said Salome.
While it may save cash, barter isn't free. Every vendor’s proceeds are reported to the I-R-S as taxable income.


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