Budget Trading and ON-Going Contracts

By Valerie Hale

Most businesses prepare an annual budget. For some, it is very detailed/high-level and for others, it is merely a guideline. Regardless of the level of detail, here are some questions you need to consider in order to take advantage of trade:

  • Am I willing to change vendors or would I prefer to maintain a relationship with the current supplier?
  • How much savings would I need to gain in order to make a switch?
  • Which expenses would be easier to obtain through trade (i.e. it is easier to obtain services/advertising than items in the capital budget)?
  • Am I comfortable bringing my Trade broker in as a consultant when formulating my budget?
  • Are there areas of my budget where spending more would be advantageous if revenue was available (e.g. outside cleaning service, marketing, staff/customer incentives)?

The standard rule for Tradebank transactions is that single amounts up to $10,000 taxes included must be full trade; with annual contracts or annual supply budgets, the $10,000 threshold can be based on the annual amount. For example, a manufacturer hired a large cleaning company to clean the plant on a weekly basis for $500 a week (i.e. $26,000 for the year). A cash/trade ratio could be negotiated on the contract as a whole. The TRADE Dollar percent/ratio should be clearly stated in the contract.

The details of the contract could include one of the following:

  • A portion of each invoice payable in TRADE Dollars at the time of invoicing.
  • A prepaid deposit in TRADE Dollars (out of which a portion of each future invoice is paid).
  • An agreement that after $X is paid in TRADE dollars the next amount of business is paid in T$.
  • An escrowed amount is released as invoiced.

Obviously deals with a cash portion are less attractive than getting the product/service for full trade. However, an ongoing cash amount can lock in a deal and make it more feasible for a supplier to continually provide a portion in TRADE Dollars. By signing an ongoing contract, the need to go back through the Trade broker for each request from the vendor is removed.