Bartering and Keeping Uncle Sam Happy
Bartering has been a method of transacting business since the beginning of time. It is a common misconception that bartering is illegal. It’s not… bartering and not reporting it is what gets you in to trouble. So here’s how to handle your business to business trades.
First, you want to set up a bank account in QuickBooks called “Barter Clearing Account” (or something to that effect). Let’s say you’re bartering with an electrician. You would invoice the electrician just like you would any other customer, but the difference is, you’re going to receive payment into this barter bank account (as opposed to your regular bank).
Then, you’re going to “write checks” in QB to the electrician just as if you were writing a check, but again, instead of using your regular bank, you use the barter bank. These two transactions offset each other.
You trade for a non-business expense? Still do the invoice part, but code the check to the vendor as owner’s draw
It is not an even trade? Only post the value of the trade in the barter bank, post the rest to your regular bank. (This means take two payments on an invoice, or write two checks, one from each bank)
Going through these steps allows you to recognize all the necessary parts of this transaction:
- The revenue of your work performed/product sold
- Sales tax (if applicable)
- The expense of whatever you traded for
- The fact that no money was deposited
This keeps the tax man happy and maintains accuracy in your financial records. So barter away, small business owners!