When Expertise Falls Short: A Surprising Encounter with Our New finance Director
Recently, our organization welcomed a new finance Director, a move that was initially met with excitement and optimism. With over two decades of experience in corporate finance, an impressive resume featuring notable Big 4 firms, and an MBA from a highly respected institution, she seemed like the perfect fit for our $15 million revenue manufacturing company. However, my enthusiasm quickly turned into concern during a recent discussion about the monthly close process.
While guiding her through the routine financial procedures, she posed a question that left me momentarily speechless: “Why are we wasting money every month on depreciation expenses when we’re not actually spending anything?” At first, I assumed she was joking or possibly testing my knowledge. After all, depreciation is a fundamental principle in Accounting.
Despite my attempt to clarify, explaining how depreciation allocates the cost of assets over their useful lives to align expenses with the revenue they generate, her confused expression indicated a significant gap in understanding. She questioned why we continue to expense assets that we have already paid for, seemingly unaware that this practice is deeply rooted in Generally Accepted Accounting Principles (GAAP).
Things took an interesting turn when she challenged the notion of capitalizing our recent $50,000 server purchase. She suggested we should expense it in full to maximize this year’s tax write-off instead of spreading the costs over time. When I introduced her to the concepts of capitalization thresholds and asset classification, she recommended we consult our tax advisor to validate her doubts. I couldn’t help but feel a pang of frustration when I realized I was spending more than half an hour explaining concepts that are usually introduced in the first introductory Accounting courses.
To add to the perplexity, she inquired why our cash flow statement didn’t align with the Profit and Loss (P&L) statement. When I patiently explained that net income does not equate to cash flow, her bewilderment was palpable.
This experience has left me contemplating how someone with such a robust background could lack an understanding of these fundamental concepts. It raises questions about her prior roles — was she merely overseeing teams who handled the intricate financial details, or is there a broader issue of inflated resumes in the finance sector?
As we prepare for the board meeting next week, where she is expected to review our financial statements for accuracy, I can only hope that her lack of foundational knowledge doesn’t compromise our financial integrity. Navigating complex financial landscapes requires not only experience but also a solid grasp
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