Navigating Challenges with a New finance Director: A Senior Accountant’s Experience

In the fast-paced world of corporate finance, it’s vital for leadership to possess a strong grasp of the foundational concepts that drive financial reporting and analysis. However, a recent experience with our newly appointed finance Director has left me both surprised and concerned about her understanding of basic Accounting principles.

About six weeks ago, our company welcomed a new Finance Director who boasts over 20 years of experience in the finance sector, including a prestigious Big 4 background and an MBA from a well-known institution. As a senior accountant reporting directly to her, I was cautiously optimistic about the fresh perspective she would bring to our team.

That optimism was tested yesterday during our monthly close process. As I walked her through the necessary steps, she posed a question that caught me off guard: “Why are we wasting money on depreciation expenses every month when we’re not actually spending anything?” Initially, I thought this was perhaps a test of my knowledge. However, as the conversation unfolded, it became clear that she genuinely did not grasp the essential concept of depreciation—an area typically covered in introductory Accounting courses.

To clarify, I explained that depreciation serves to distribute the cost of tangible assets over their useful lives, aligning expenses with the revenue generated during those periods. Her reaction was one of confusion, as she questioned the rationale behind expensing equipment that we had already purchased. This prompted me to further elaborate on basic GAAP principles, demonstrating journal entries and the reasoning behind asset classification. Yet, her response remained perplexed, as she asked for a step-by-step walkthrough, claiming the topic seemed overly complicated.

As our discussion continued, she raised another question regarding our recent acquisition of a $50,000 server. She advocated for expensing the entire cost in the current year to reap immediate tax benefits, demonstrating a lack of understanding of capitalization thresholds and expense categorization. When I suggested consulting with our tax professional, she seemed unconvinced, stating that something about the process felt incorrect.

To add to my concerns, she is responsible for reviewing our financial statements for accuracy ahead of their presentation to the board next week. The pressure is on, especially considering that we are a $15 million revenue manufacturing company—not a small startup where Accounting practices might be less formal.

Furthermore, she recently expressed bafflement regarding why our cash flow statement did not align with the profit and loss statement. This led to another dialogue where I explained the critical distinction between net income and cash flow—