To help managers plan, company documents barter sales as separate listings on financial statements.
At Walter Joseph Communications, a small television-production business in Chicago, barter has been big for nearly 10 years. "When times are bad, as in the last recession, it might account for up to 15% of our sales," notes Alan Lusk, an executive vice-president at Walter Joseph. "Even during good years, when barter accounts for closer to 5%, we use it to counterbalance our strong sales seasons, which are the spring and autumn."
Documentation is a snap because the company does most of its swaps through one of three barter networks. "We receive monthly statements that detail the value of services we contributed to the network, the value of anything we received, and the status of pending transactions," says Lusk.
To help Walter Joseph's managers with planning, the data on barter sales and expenses are broken out as separate listings on the company's financial statements. Breakdowns are unnecessary for the IRS, which considers barter sales simply another form of revenue. "So, for our 1993 taxes, we simply added our $20,000 of barter sales to other sales and reported the results on a single line on our returns," explains Lusk.
Lusk says the company will barter any service it can sell. For example, recent transactions included production of a marketing videotape for a fencing company and a commercial for a local furrier. The work can be quite pricey: two years ago, Lusk recalls, "we flew staffers to three different cities to produce a marketing tape for a billboard company, for which we would ordinarily have charged $30,000."
Instead of receiving cash, the company earns barter points, which it can then use to purchase goods or services from any other member of the barter network. Besides obvious choices -- restaurant meals and office supplies -- "we use points to explore aggressive marketing strategies that we would normally never have tried," says Lusk. One example: "We spent 4,900 barter points to run advertisements in a restaurant magazine we had never used before and wound up attracting clients that are still with us."