Can you do some barter system of business with the organizations you deal with?
Why? Why should a barter system?
Hope you know what a barter system is. The barter system is an ancient method of trade where people directly exchange goods or services for other goods or services, without using money as a medium of exchange. There is no cash transaction involved.
In business what is the benefit of such a system?
It offers three benefits.
1. It will create business for both organizations with out exchanging cash
2. It increases turnover and profit
3. It helps to manage cash flow
What are the defects in the system?
The defect of the system is there will be business and profits but there will not be any cash in hand.
We will review further on this on the benefits side.
It is actually a double benefit model. I am selling my foundry products to a organization. That organization is having metal scrap. Our organization requires metal scrap as a raw material. In exchange of a product we are getting scrap from that organization.
There is another example. We received an order for a metal part from an organization that manufactures cloth materials. Our organization requires cloth materials for our staff, so we purchase the same from them after rate negotiation..
There is another possible approach as well. If we can identify customers for the scrap and cloth materials, as in the previous examples, we can purchase larger quantities and resell them. The selling price should be slightly higher than the purchase price of the cloth. This will generate profit for the business and also increase turnover.
In this arrangement, we do not receive cash from the organization to which we sell our product. Instead, we receive the material produced by them. We then conduct further business with that material and earn a modest profit from its resale.
The product received in exchange for the goods supplied or work carried out is effectively equivalent to receiving cash for our business. If we resell the product received, it also results in additional profit generation.
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