Trading Services – Hidden Costs For Your Small Business

Trading services with other professionals may seem like a no-brainer. They have something you need, and you have something they need…why not just trade? Today I will highlight three reasons:

1). Well, It’s Not Real Money or Income

Although you or your company may be receiving a benefit, it isn’t really “free” to give something away. Depending on your industry there are costs to do business. In the case of a free haircut or mowing someone’s lawn, there may be little cost (especially if you are offering this service yourself as the business owner). However, time is still money, and you still paid good money for your shears or your mower or your truck. If you are trading retail goods or products, the cost can be much greater.  An example of this would be if you handcraft candles or soaps and trade them for other goods. You have the cost of not only your time, but your material.

2). Trading Can Be Hard To Track

It is one of those things that starts out as a wonderful idea. It doesn’t seem like it would be a big deal to keep track of and you probably trust the person. Unfortunately, this can get OFF track easily. Are you the one that is always doing the trade? Does your staff know how to process these transactions correctly? How is this recorded in your income and expenses in your POS system or for your P&L Statement?

3). You May Be Trading Something You Don’t Need

Let’s consider that it is two small business owners trading services. My example above where someone trades haircuts for lawn maintenance, seems fair. However, if you are just starting out a salon as a stylist, you could use that time slot for someone paying you real cash and you could mow your own lawn. So it isn’t always that the trade is “unfair” it’s that your trading something you would normally take in cash for to pay bills, but instead your trade is something you don’t actually need. This is especially important if you choose to trade for things like car service or restaurants.

My next blog post are going to be on the BENEFITS of trading. Although I caution anyone against trading, there are certain instances where it can be very beneficial. Give us a call if you have questions about how these options effect your accounting!