Title: When the Basics are Overlooked: A Worrying Situation with Our New finance Director
Recently, our company welcomed a new finance Director, and while her 20+ years of experience in corporate finance, a robust Big 4 background, and an MBA from a reputable institution seemed like a perfect fit, we’re now facing some unexpected challenges.
As the senior accountant reporting directly to her, I assumed our monthly close process would be a straightforward walkthrough. However, during our recent discussion, I encountered a surprising gap in her understanding of fundamental Accounting principles.
She first raised eyebrows when she questioned the purpose of depreciation, expressing disbelief that we were “wasting money each month on depreciation expenses” despite not incurring any actual expenses. Initially, I thought her inquiry was a test of my knowledge. I took the opportunity to explain depreciation, clarifying its role in allocating the cost of assets over their useful lives and matching expenses to the revenue they generate. Unfortunately, her blank stare indicated that she wasn’t quite grasping the concept. Her response, “But we already paid for the equipment. Why are we expensing it again?” left me momentarily speechless.
As I delved deeper into the basics of GAAP and walked her through the relevant journal entries, her insistence that the process was “unnecessarily complicated” continued to raise red flags. Our time spent together, which stretched to about 30 minutes, focused on foundational concepts that are typically covered in an introductory Accounting course.
The conversation took another unexpected turn when we discussed our new $50,000 server. She suggested we should simply expense it this year to maximize our tax write-off, questioning why we were spreading it out. Again, I tried to explain the importance of capitalization thresholds and the distinction between assets and expenses, only to hear her propose we should “check with the tax guy” for confirmation that our approach was correct.
To top it off, she is tasked with reviewing our financial statements for accuracy before our upcoming board meeting. In a manufacturing organization like ours, which generates $15 million in revenue, one would expect a certain level of proficiency in these topics, not to mention consistency between the cash flow statement and the profit and loss statement. When she expressed confusion over why our cash flow statement didn’t align with the P&L, it was clear that we were well beyond mere misunderstandings.
As I reflect on our interactions, I can’t help but question how someone with two decades in finance could lack such
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