I haven’t caused any trouble recently so now seems like a good time to jump into the fray again!  As you should all know I’m a big fan of barter exchanges and I actively recruit trading partners into my exchanges on a regular basis.  That being said there are times when it is not to your advantage to do so.

The most common reason to trade directly with someone is simply that they are not a good candidate for an exchange.  They may be skittish about barter in general and the baggage (explaining it, the commissions, etc.) that comes with exchanges just isn’t worth it.  In those cases I just keep it simple and trade directly.  If they want something that is available through my exchange I just buy it for them through the exchange.

A more controversial reason to keep a trader to yourself is that the deal is too good to share with your exchange.   I’ve never run into a  trade partner who didn’t have some kind of limit as to how much barter they wanted to do.  If you work out an ongoing trade with a vendor for something really juicy I have found it advantageous to trade with that vendor to their full capacity directly.  For example I trade with both a grocery store and a butcher shop.  These relationships are pure gold in the barter industry.   I will personally use the full capacity that both of these vendors want to trade so there is no way I want to open them up to trading with others.  Even if I didn’t want to use my credit with them myself , I could probably spend gift certificates for these vendors pretty much just like cash.

Additionally I should mention that if you have a vendor that you think would be in high demand and you are on the fence about recruiting them into your exchange, proceed with caution.  I personally had a issue where I recruited a vendor that I was pretty hot on into one of my exchanges.  Once they were in, the exchange informed me that they were rationing services from the vendor.  I was told that I could not necessarily buy as much as I wanted from this vendor even if it was under the vendor’s total barter capacity.   Never mind the fact that the only reason anybody in the exchange had a shot at trading with them is because I recruited them in.  I ended up sorting it all out but the experience definitely put a damper on my enthusiasm for recruiting for the exchange for a while.

As all of you fellow barter fanatics know, being taxed on barter transactions is unavoidable if you want to stay on the right side of the prison door.  So with that in mind I think it’s worth while to mention that there is definitely a positive side to reporting all your trades:  Including your trades in all your books makes your financial statements look better!  In these times with great deals on loans, but so few people who qualify, keep in mind that every trade you make shows up on your P&L statement and makes you look that much more attractive to lenders.  If you belong to a barter exchange you will definitely need to include your exchange account on your balance sheet as well.  In the same way that inflated barter prices can hurt you on tax day, it can help you on the day you close your new lower home or business loan.  Additionally if you are looking forward to a loan you need in the future, or you want to start working on selling your business, it’s never too late to start bartering to improve your financials.

Unfortunately I have yet to find a way to barter for insurance.  It’s not because it’s illegal to barter for insurance (don’t get me started).  I think it’s simply because insurance is sold by brokers that are paid on commission.  There isn’t enough of a margin for a broker to sell insurance on barter.

Anyway…regardless of that I have found a way to use barter to save on insurance.  What I do is quite simple:  I buy less insurance.  Now that I have auto mechanics and auto-body shops that I can barter with, I am not worried if I reduced the amount of auto insurance that I carry for repairs on my own car.  I know that if I get in an accident I can get my car fixed without having to pay for everything in cash out of my pocket.  This is true for my home appliances too.  A while back I bought my wife a nice front loading clothes washer and I was told that it’s smart to buy the extended warranty with those.  Well I did that for a while but then I realized…I can always barter to have the appliance repaired if it breaks.  I dropped the insurance, keeping my cash and if it breaks the barter appliance repair guy is just a call away.

Clearly there are risks in going this route.  If my car is totaled in an accident my barter repair shop doesn’t really help.  And of course you still need liability insurance on your car to cover everyone else on the road.  What this strategy does allow me to do though is reduce the amount of insurance that I’m paying for and still be able to sleep at night knowing that I still have a way to repair my cars if needed.