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What is actually the Bartercard Network?
It is the biggest business-to-business trade exchange
organization in the world, within which businesses (companies,
partnerships, sole traders etc.) engage in transactions between
them (on a local as well as global basis) without using cash.
The said transactions relate to both products as well as
services.
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What are the prerequisites for a company to join the system?
The prerequisites are relatively simple but important. The
products / services offered by Bartercard member companies need
to be of a certain quality standard. Moreover the potential
member companies need to be profitable and
Have extra capacity to service more clients
Be in a position to capitalise on an interest-free line of
credit
Be interested in offsetting cash expenses through margins
generated by incremental sales of their products or services
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What does a business need to do to join the system?
Bartercard’s trade consultants are at the disposal of
businesspeople to explain the system in detail and answer
possible questions. At such sessions, the potential Bartercard
member businesses find out what their obligations, rights and
advantages are for Bartercard members. Before any business joins
the network, it must satisfy certain economic / financial
indicators as well as certain quality standards relative to
their products and services.
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What
does Bartercard get out of this?
Every time a transaction happens within the network, Bartercard
charges a small service fee. This fee is insignificant by
comparison to the value and services provided by Bartercard to
its members, generally speaking, and for any one individual
transaction, in particular.
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How do
Bartercard members know which other businesses are in the
network?
There is a detailed directory (Green Pages) which includes all
Bartercard member businesses. This directory is updated and
distributed to all the members every 12 weeks. The Directory
contents are also accessible through the internet on a global
basis Every Bartercard member is serviced by its account manager
(trade coordinator) whose job is solely to consult with and
service his / her clients.
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How
exactly do transactions take place?
Let’s use an example to explain the process. Suppose that X is a
Personal Computer supplier who takes his clients / friends out
to dinner. The dinner costs 500 pounds. X prefers to give
restaurant owner Y a computer worth 500 pounds, instead of
paying cash. Y, though, does not want / need a computer. X,
therefore, gives Y a voucher worth 500 pounds. Y can use this
voucher within the Bartercard network to buy any product or
service from any business which is a Bartercard member. The said
500 pounds are called trade pounds. The only difference between
a trade pound and a cash pound is that trade pounds can be used
within the Bartercard network only.
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What is
the benefit for businesses which are Bartercard members?
Some of the benefits are:
New business from new clients
New business collaborators
Interest-free line of credit
Offsetting cash expenses
Purchasing with a discount equal to the gross margin from the
sale of the business’s products or services.
Increased profitability
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Can
companies restrict their transactions to within the Bartercard
network only?
No, this is neither possible nor recommended (even if it was
possible). Every business needs cash because not all
transactions or costs can happen by Bartercard. BARTERCARD does
not aim to replace the existing economy. It simply creates the
environment and opportunity of further development and growth of
businesses which are Bartercard members. It also helps the
general economy pick up, particularly during times of recession
and / or other financial difficulties – a characteristic of
economies in many countries in the world today.
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How is
the interest-free line of credit decided for each Bartercard
member business?
This depends on many factors, the most important of which are
the size of the business, the nature of the product(s) or
service(s) it provides, the turnover, the profit and loss, the
balance sheet etc
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Does a
trade exchange just accept any business as a member?
Bartercard does not. The credit risk associated with any
prospective member will be scrutinized, as the integrity of the
Debt Reserve Fund must be maintained, for the benefit of all
members.
An additional factor in selecting applicants for membership is
to ensure that there are not too many businesses in the same
business category. One of the guarantees we make is to guarantee
new additional business. Too many businesses in the same
category would result in us not being able to deliver on this
promise.
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What is
the Debt Reserve Fund?
The Debt Reserve Fund is to protect the integrity of the trade
exchange.
Should a member remain unpaid for work that has been completed,
they are an unsecured creditor just like in the cash economy.
However, unlike the cash economy, if the trade exchange member
has initially received an authorisation number from Bartercard,
to ensure the funds are available prior to commencing the job,
he or she will be protected by the debt reserve fund, should the
other party's business fail.
The debt reserve fund is designed to support the barter network
in order to keep it going, even if a member business fails.
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What
type of businesses benefit from joining a barter trading
exchange?
All business types, subject to the caveat above, to ensure
increased sales. This includes manufacturers, wholesalers &
distributors, retailers, professional service groups etc.
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What is
the profit margin on the increased sales that Bartercard members
receive from Bartercard?
Businesses typically accrue a portion of their normal gross
profit from their increased sales as a credit against business
spending, thereby receiving a discount on the purchases they
make (because the trade pounds they used to make a purchase
include their gross margin too). To understand this better, let
us use an example. Suppose a developer buys a plot for 100,000
pounds. He agrees with the owner of the plot not to pay 100,000
pounds cash for the plot but to give the plot owner two
apartments on the building whose market value is 50,000 each.
The cost of these apartments for the developer is, say, 30,000
pounds each. The developer, therefore, has purchased the plot
for 60,000 pounds, even though the plot owner collects products
worth on the market 100,000 pounds
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Is it
important for me to keep a balance between those sales made
using Trade Pounds and those in cash?
Absolutely. This is one area where Bartercard value adds the
effort and offers its services. The said services aim at
maintaining the balance between sales and purchases through
Bartercard and to ensure adequate cash-flow for the business.
Sales made on Trade Pounds are no different from a business
managing its Accounts Receivable to ensure timely payment and
adequate cash-flow.
Our recommendation is that a business should have between 5 -
20% of its sales made through a Trade Exchange with the
remaining business revenue coming from cash sales. Trading
activity should be kept in balance between Trade Pounds earned
from sales and Trade Pounds used for business expenses.
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Can
Bartercard members find enough ways to spend trade pounds in
their business?
Yes, an experienced Account Manager is assigned to work with
every Bartercard member. The said account manager will review
every line item in the business’s P&L Statement and source
products and services accordingly. This will be from advertising
through to office supplies and stationery, raw materials used in
production, or wholesale goods that can be resold.
The focus of the Account Manager is threefold:
Business expenses - e.g. Printing, advertising, vehicle running,
accommodation, repairs and maintenance, raw materials etc
Capital expenditure - e.g. motor vehicles, furniture, capital
equipment, computers etc
Investment - commercial or investment property
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Can
other kinds of services/products be purchased with Trade
Dollars?
There are many different ways in which barter deals can work,
the simplest being a straight exchange of goods/services for
Trade Pounds. However, there are other ways Trade Pounds can be
used where cash is tight.
For example, a small manufacturing company that wants to reward
their top salespeople with an incentive trip, but budgets are
tight. Working with a trade exchange, the business is able to
pay for a trip by selling excess inventory to other members of
the trade exchange. The list of opportunities for smart trade
exchanges is virtually unlimited.
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What are
the tax advantages or disadvantages associated with barter?
Barter income should be viewed in exactly the same way as cash
income. There are no inherent tax advantages or disadvantages as
a result of a barter exchange. Bartercard trading is fully
compliant with Income Tax, VAT regulations etc.
Barter is a marketing tool, a tool for further development,
productive expansion and profitable growth of the business and
not a tax tool
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