Black Ops: GAES (Generally Accepted Elementary School) Accounting

Black Ops posts will talk about the daunting operational side of starting a company, like taxes, incorporating, accounting, legal, and pretty much everything else that doesn't have a damned thing to do with shipping software to help parents.

Last time I started a company I used the best accounting firm in the city, spending thousands only to learn they were just mucking with the QuickBooks files which I provided.  On top of that I received two different IRS office actions based on their work and counsel.  So after two years of that, I just used their prior filings to tweak my own QuickBooks setup and used TurboTax and had NO office actions thereafter.

This time we're going even simpler and will be using GAES (Generally Accepted Elementary School) Accounting as shown in Figure 1.

Fig 1. GAES Profit Algorithm

If you are well versed in Net Present Value, Expected Commercial Value or other financial models that predict future revenue streams, GAES can be a little tricky, so bear with me:

The theory essentially says that you need to make more than you spend to feed your family and stay in business.

If you can't do that, profitability in year 5 means shit.

-Chris