Barter Exchange: Deriving Value From Virtual Trade Credits
Though barter is a concept that most people consider crude, it is thought that the barter system was only relevant in prehistoric societies. It is believed that since we have paper and plastic money that there is no need for bartering. However, there is a growing resurgence of the barter system assist trade and commerce between companies is making critics of the system take another look.
An exchange for barter services allows its member organizations/individuals to trade raw materials, supplies, finished goods, or services using a virtual currency that is limited to use by that exchange's members. Barter systems can help its member organizations to reduce inventory, save inventory costs, boost revenues, and utilize their maximum production capacity.
There exists a significant difference between the barter system as is understood commonly and the actual barter trades carried out through an exchange. In the traditional barter trade, both parties involved were required to make a sale and a purchase from the other party. This compulsion limited the choice of clients and fetched only lower values for goods and/or services. In comparison, the present day barter exchange operations, the exchange allow their members to purchase or sell from another specific member and settle the transaction in trade credits, which is also called the barter currencies.
Saving members from having to deal with the same people in order to buy or sell goods and services is an asset to the users of virtual currency. For each member that uses this tool will need to pay a small fee to the barter exchange as commission. The trade swap tool has many advantages - one of them is the traditional commercial dealings and its need for liquidity.
To the general public, there is little clarity regarding barter exchanges, and there significance. It comes as a surprise to many that bartering is governed by a set specific laws and by the Internal Revenue Service.
Any barter exchange program must provide the IRS with all details of its proceeds by completing form 1099B. This form is available in paper and in electronic form, and all barter exchanges must complete and file this form by the 30th of March.
There exists a significant difference between the barter system as it understood commonly and the actual barter trades carried out through an exchange. The present day barter exchange operations allow their members to purchase or sell from another specific member and settle the transaction in trade credits, which is also called the barter currencies. Use of virtual currency in a barter currency saves its members from the obligation to deal with the same party for both buying and selling of goods or services. Another advantage of trade swap is attributed to the need for liquidity in traditional commercial transactions. There are specific laws governing the bartering process.
Published September 15th, 2008
