Why We Hate Bartercard

Riann Umaga-Marshall Managing Cash, Odds & Ends

Heard of Bartercard?

It’s a business-to-business trading system that allows members to trade their goods and services within the Bartercard business community in lieu of cash. Trade Dollars are exchanged within the network, which are then used to pay expenses that would have otherwise been paid in cash –eliminating the need of paying with real cash within the network.

In essence, Bartercard is meant to help a business’s cashflow by pulling in customers that you wouldn’t otherwise pick up – the argument is that people will come to you simply because you take Bartercard. It’s also meant to take some pressure off cashflow by giving you a non-cash resource to make real payments.

In reality, this adds up to more pressure on your cashflow.

As a business owner, you’ll pay most things with cash: your wages, your suppliers, your GST, and so on. Introducing a separate currency (which can’t be exchanged into real dollars), which is only accepted by certain suppliers leads to a more convoluted cashflow process.

Imagine this: You make a sale today of $100. You had to pay your suppliers $20, your staff $15, GST of $13, and income tax of $15. This leaves you with $37 in the bank.

Instead, today you make a sale which is paid for in Bartercard. You receive $100 Bartercard Dollars. You still have the same outgoings, meaning you pay $63 in real cash (suppliers, staff, GST, and tax), and receive $100 of funny-money.

That funny-money then needs to be spent somewhere. If you can’t spend it at your suppliers then you end up spending (wasting) it at your local pub simply because they accept the Bartercard Dollars. Most people are happy to waste it on the basis that it’s a sale they wouldn’t otherwise have received – they think of it as free money, without realising that they’ve spent $63 of real money to earn the $100 of funny-money.

Why pay for unnecessary food or entertainment (popular proponents for Bartercard), when you could be using the equivalent value in cash to reinvest into your company?

Trade Dollars also aren’t as liquid as cash, meaning if you get into any financial hot spot and need to pay off something quickly, you’ll be stuck.

At the end of the day, it’s essential for all business owners to have a grasp on their cashflow. Adding another dimension, especially one that plays by a completely different set of rules, just adds another level of complication.

Our recommendation? Stay clear. And remember: a cost is a cost, whether or not it’s cash is irrelevant. In fact, with fees, Bartercard will actually end up costing your business more.