The no-cash society
No tax, no interest, more sales: there is a lot to be said for barter. Paul Gosling reports on an old story
Wednesday 05 February 1997
Now, though, barter has been reinvented. Its wheels have been oiled by exchange notes and credit slips that allow members to trade in a vast array of goods.
But if barter can be transacted effectively only by using a system of exchange credits, what is the point? Surely barter is then simply money under a different name? Not so, says Mike Timoney, joint managing director of Bartercard UK, the newly launched barter brokerage service.
"The basis of barter assumes that businesses would love to buy everything through the supply of more of their own goods," says Mr Timoney. "Say you are a hotel owner. The hotel would love to get printing done by barter, but you have difficulty in finding a printer who wants to stay in your hotel.
"We are a third party record keeper, which allows the hotel to go to the printer and have that printing done using their Bartercard, just as you would use a Visa or a Mastercard. The voucher comes to us for processing, and the printers are free to spend that credit with any of our other clients."
Purchases, in other words, are represented by extra sales, rather than as a cost against sales. What is more, the new trade is partially financed by interest-free credit. Clients are not charged for goods purchased, even if they have not yet supplied other products in exchange.
Evidence supports Mr Timoney's view that barter has a future as well as a past. In the US, half of the top 500 corporations trade regularly through barter, creating a $6bn (pounds 3.8bn) a year exchange trade, and it is growing fast. In Australia, Bartercard alone has A$25m (pounds 13m) trade a month.
There are differences between the US and the UK. In the US, "corporate barter" is popular with most big corporations, which trade, for example, old stock in exchange for unsaleable, non-peak television advertising, either directly, or via a broker. These are clear "win, win" transactions.
Bartercard UK is aimed at the "retail barter" market, brokering between small businesses, exchanging products at market value, with transactions taxed accordingly.
"We are unique in having account managers," explains Mr Timoney. "We have a sales team to promote the concept to the client, and we give the accounts managers the job of education, stimulating sales and providing a shoulder to lean on."
So far, 220 clients have been signed up by Bartercard UK and a further 50 organisations are joining each month. The company has 16,000 clients worldwide, mostly in Australia, New Zealand and Sri Lanka, and is about to launch in Malaysia as a base to operate across the Pacific Rim region.
It may be difficult to overcome existing prejudices in Britain, not least among companies that have been involved with earlier barter scheme promoters, some of which went bust. Even the much-publicised local exchange trading schemes, Lets, that facilitate barter between individuals, have not taken off to the extent predicted.
And barter, using a broker, has a price: Bartercard charges pounds 595 to join, a pounds 20 monthly membership fee (half in cash, half in barter), and a charge of 5 per cent on the sterling value of each transaction in cash, plus another 1 per cent in barter.
Yet many businesses that have tried barter are positive about it. Rosemary Streamer runs an accountancy service in Reading (where the local council has also joined). Small businesses like hers have the most to gain, she believes, because it helps them to expand without having to borrow.
"There is no way I could have bought all my new equipment, computers and plain paper fax, and update all my computers, in a cash-only world," says Ms Streamer. "It has also allowed me to access a lot more clients than I could in a cash world. It is a brilliant concept. Bartering is like joining an exclusive club. Your name becomes known to other parties."
Without raising any extra capital, Ms Streamer obtained pounds 10,000-worth of new computer equipment, allowing her to use her savings on software to improve efficiency. "You maximise potential and profitability because you already have the staff," adds Ms Streamer. "New customers are coming in, but the costs are covered so you generate extra sales for nothing. I don't know why someone didn't do this before."
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