1. Make sure that the barter is necessary.
You should only enter into a barter agreement for something that you were planning to purchase anyway. If you barter for products or services that you don’t need, you really don’t gain anything. It is a form of impulse shopping and can cause you to waste valuable billable hours, which can adversely affect your budget and unnecessarily increase your workload.

2. Set a dollar value.
Bartering is more than exchanging favors. It is a business agreement to exchange goods or services. Therefore the exchange should be comparable. The dollar value is set based on the price that you would sell your product or service for. Both parties agree on the amount and meet the dollar value. This helps you avoid one-sided agreements, which can be costly and destroy business relationships. Setting a dollar amount ensures that both parties clearly understand their contribution to the barter agreement.

3. Use receipts.
Receipts are critical to any business accounting process. You always need to get a receipt for any business purchase. Bartering is purchasing with products or services, in lieu of money. Also, a receipt for a barter agreement means that you have satisfied your obligation to the agreement. It ensures that you do not owe a balance.

4. Set a time frame.
Barter agreements should have a start and completion date. This protects both parties and makes sure that you get what you need when you need it. There also needs to be an expiration date to the agreement. You may commit to something today that you will not be able to deliver six months from now. Or, you may have time to work on a project now, but will not have any availability a month from now. Setting a time frame for the agreement allows you to plan your schedule and remain on task.

5. Record transactions as debits and credits.
Whatever you receive from the barter agreement is income. Recording it maintains an accurate tally of gross income and helps you track how much revenue you are generating. Whatever you contribute to the barter agreement is expense. Tracking your expenses is how you know how much it costs to run your business. It is imperative that you account for these debits and credits on your balance sheet. For example, if you record $50,000 as annual expense, but you provided $10,000 in bartered services; your actual annual expense is $60,000. So, if you do not include barter contributions as expense, your budget will have a shortage.

Effective bartering can save you time and expense. But if it is not managed properly, it can be very costly. A little bit of planning can help make your bartering experience profitable.