About Me

I am A Chartered Certified Accountant who does a bit of gardening.
The Pictures of the flowering and non-flowering plants, fruits, vegetables, culinary & aromatic herbs
in this blog are of my garden.
Most of my garden collections are driven by the Fs: They either Flower, have a Fragrance, provide Flavor, bring Fruit, Food or are air Freshening.

Thursday, 8 January 2015

You don't need money to do business!

Welcome to 2015 and may good tidings come your way every single day!
As the year begins, it is common to have cash constrains either at a personal or business level or both. I would like you to consider an alternative to hard currency – some form of a barter trade.

According to Investopedia barter trade is “The act of trading goods and services between two or more parties without the use of money. Bartering benefits individuals, companies and countries that see a mutual benefit in exchanging goods and services rather than cash, and it enables those who are lacking hard currency to obtain goods and services.”

We offered a service to an airline and they opted to pay for the service by offering an air ticket in lieu. The ticket was for any destination in Europe. The advantage to the airline was that they did not have to part with cash. At the same time they would utilize the seat in the plane that would have gone unoccupied while they would still have been incurring the same fixed overhead costs. The variable cost for that passenger is however much less than the amount we charged them for the service we had offered.

For us on the other hand, if we were to procure the ticket to our preferred destination in Europe, it would have been much more than the amount we would have been paid for the service we offered. This was a win-win arrangement which we have now used for a long time with this particular airline as we continue to offer the service.

However, when considering this option, each scenario should be weighed carefully and the opportunity costs carefully analyzed. We tried the same arrangement with another airline but they limited their routings to East Africa and it didn’t work out so well. The ideal scenario would be to consider the comparative value of the goods or services with those to be traded.

I also remember a story of someone who was offered a stake in a business but did not have the money to put in. He therefore offered his professional services in lieu and eventually earned his share of the business. The lesson here is that we should not let opportunities pass without looking for possible ways of seizing them. What do you have that you can offer? Don`t Pay For it – Trade For it is an interesting link to see the concept in another angle.

To #professionalizeyourbusiness, proper accounting has to be done for such transactions as well to reflect both the income and expenditure relating to it.

Do you have an experience you can share?

Image Credit: nacda.com

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