Navigating Financial Fundamentals: A Disturbing Encounter with Our New finance Director

Recently, our company brought on a new finance Director, a move we initially viewed as a significant asset to our team. With over 20 years of experience in corporate finance, a robust background with a Big 4 firm, and an MBA from a prestigious institution, she appeared to seamlessly fit the mold of a well-qualified leader. However, my recent interactions with her have raised serious concerns regarding her grasp of fundamental financial principles.

Approximately six weeks into her role, I was guiding her through our monthly closing process when an unexpected question arose. She expressed confusion over why we incur “wasteful” depreciation expenses monthly, arguing that since we had already purchased the equipment, there shouldn’t be a recurring expense. Initially, I assumed she was testing my knowledge. However, after I clarified that depreciation is a means to allocate the cost of tangible assets over their respective useful lives, thereby aligning expenses with revenue generation, her blank stare suggested otherwise.

Despite my efforts to explain depreciation in straightforward terms—standard practices laid out in Generally Accepted Accounting Principles (GAAP)—she seemed unmoved. In fact, she requested a detailed, line-by-line breakdown, as the concept appeared overly complex to her. The conversation shifted when she questioned why we couldn’t expense our recent $50,000 server outright to leverage a tax write-off this year, rather than prorating it over time. After I introduced her to the principles of capitalization thresholds and the distinction between liabilities and operational expenses, she suggested consulting our tax advisor, intimating that my explanation must surely be flawed.

Adding to my bewilderment, she is expected to review our financial statements with meticulous accuracy before they are presented to the board next week. This situation raises alarm bells; we operate a manufacturing firm with $15 million in revenue, not a nascent startup where lax Accounting might be more understandable.

Further complicating matters, she expressed genuine puzzlement over discrepancies between our cash flow statement and the profit and loss statement. When I pointed out that net income differs significantly from cash flow, she did not seem to grasp the Accounting mechanics behind these critical financial statements.

As I reflect on these exchanges, I cannot help but question how a professional with such extensive experience in finance could lack a firm understanding of these fundamental concepts. It leads me to consider whether she has merely occupied roles where others have been responsible for the intricate details, or if her qualifications have been exaggerated. We must advocate