A Concerning Situation: When a finance Leader Lacks Fundamental Knowledge

About six weeks ago, our organization welcomed a new finance Director, a role that I, as a senior accountant, report directly to. With over 20 years in corporate finance, a distinguished Big 4 background, and an MBA from a notable institution, her credentials appeared impressive on paper. However, recent interactions have raised some significant concerns about her grasp of basic financial principles.

During our monthly close procedure yesterday, I was surprised when she questioned the necessity of depreciation expenses. She remarked that it seemed like we were “wasting money” each month on costs that didn’t involve any actual outlay. Initially, I thought she might be testing my understanding, so I promptly explained the concept of depreciation: it’s a systematic allocation of the cost of tangible assets over their useful lives, designed to match expenditures with the revenues generated from those assets.

Unfortunately, her response was one of confusion. She simply could not grasp why we were expenseing equipment costs again if we had already made the purchase. I found myself taking the time to break down basic GAAP principles and show her the related journal entries over the course of half an hour. To my dismay, she still felt that the process seemed unnecessarily complicated.

Additionally, she questioned why we couldn’t classify our newly acquired $50,000 server as an immediate expense for a tax write-off this year rather than capitalizing it over time. While I elaborated on capitalization thresholds and the differences between assets and expenses, she suggested checking with our tax consultant, expressing skepticism about my explanation.

To add to my concern, she is set to review our financial statements for accuracy before their submission to the board next week.

For further context, our company is a manufacturing firm with $15 million in revenue—not a small startup where one might expect a more informal approach to Accounting practices.

In another instance yesterday, she inquired why the cash flow statement did not align with the profit and loss statement, showing genuine confusion when I clarified that net income does not equate to cash flow.

I find myself questioning how someone can navigate two decades in finance while lacking such foundational knowledge. It raises the possibility that she has been in roles where someone else carried the weight of the work, or perhaps there is a troubling pattern of résumé inflation at play.

The implications of these misunderstandings not only impact our financial integrity but also pose risks for future strategic decisions. It’s essential for leadership