Barter exchanges operate on the ability to know the balance and trading obligations of all members and to regulate the activity between those who are obligated to accept trade (those in debt) and those who wish to spend (those in credit). Unfortunately the following scenarios can, and do, happen:
1. The exchange issues too high a credit limit to a business that will never be able to repay it (or not be able to repay it within a reasonable amount of time).
E.g. a florist is given (and spends) a $20,000 credit limit yet is only able to comfortably accept $500 in barter per month resulting in the member eternally being in debt.
2. A member is not credit checked (or is having unforeseen difficulties) and runs up a huge commitment and then leaves. This can be resolved through careful monitoring of all accounts and ensuring that each member has an active plan to trade out of any debt within a given time. When legal action is necessary to recover a debt any cash awarded to the exchange is often less than the total balance owing and the barter exchange almost always keeps this cash themselves when they have a real obligation to repay the debt to the exchanges marketplace in goods or services which they can acquire for the recovered cash and offer for trade dollars – thereby maintaining the balance of debits and credits across all members.
3. The exchange owners make purchases using barter dollars, thereby going into debt in the exchange, and never repaying this balance. This causes inflation as the total members obligated to accept barter (those with debit balances) is less than the total members wishing to spend (credit balances). Bartercard, for example, has openly stated in their 2006 Annual Report, issued to the Alternative Investment Market in London, that this is something they regularly do.
Copying and distributing this article
Ormita provides free updates about the generic benefits of barter to those interested in local currency, community currency, countertrade, reciprocal trade, barter exchange, time dollars, hours and other forms of community trade vehicles.
You may freely copy and distribute this article provided that you attribute the author and/ or source as the Ormita Commerce Network.
About Ormita
The Ormita Commerce Network spans 5 continents, with direct representation in more than 17 countries plus additional partnerships in a further 59 countries. The business allows companies to exchange goods and services on a reciprocal trade arrangement.
Some of our Websites
Ormita Commerce Network Australia – www.ormita.com.au
Ormita Commerce Network Canada – www.ormita.ca
Ormita Commerce Network India – www.ormita.co.in
Ormita Commerce Network Mexico – www.ormita.com.mx
Ormita Commerce Network New Zealand – www.ormita.co.nz
Ormita Commerce Network United Kingdom – www.ormita.co.uk
Ormita Commerce Network United States of America (USA) – www.ormita.com
For Licensee, Franchise and Partnership Enquiries please visit : www.ormitacorporate.com
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