Often barter is seen as an ancient method of paying for goods and services where two individuals swap to receive what they need. Today this type of direct barter has been updated to a more sophisticated system, which allows for complex trading. It exists in conjunction with modern monetary systems and is part of many companies’ day to day transactions.

Direct trades can only take place when there is a simultaneous coincidence of wants, meaning each company wants what the other company has, in the exact same amount, at the exact same time. This is often difficult to achieve and makes direct barter difficult to find and negotiate.

A more ideal situation is to perform multilateral trades, where a number of companies or individuals are participating in the trade. This eliminates the need for a coincidence of wants and allows many companies to receive the products or services they need without spending cash. This type of trading can become increasingly complex if not monitored closely. This is why many companies who participate in this type of modern barter are members of a trade exchange.

A trade exchange provides companies the opportunity to trade with a number of partners and for the transactions to take place at different times. Therefore, no one company needs to sell all of their products or service at one time in order to purchase what they need.

This type of barter works, because a barter exchange provides members with a complementary, private currency. This eliminates many of the problems created by direct trades. With the private currency, companies can buy from and sell to any other member of the exchange, just like they are using cash. Transactions are easily tracked and managed, like balances in a monetary system. It also increases the likelihood of finding and negotiating trades and decreases the time period required to complete transactions.

While these transactions don’t replace a company’s cash business, they give companies an additional revenue stream to fill excess capacity and sell perishable inventory and allows them to offset cash business purchases with the barter currency they earn. It also brings them new business that they wouldn’t have otherwise received.