Surprising Gaps in Financial Expertise: A Cautionary Tale

Recently, our organization welcomed a new finance Director, and I must admit, I am both intrigued and concerned by the encounter I’ve had with her. As a senior accountant in our company, I report directly to her and have been tasked with guiding her through our monthly financial processes. With over 20 years of experience in corporate finance, an impressive history with a Big 4 firm, and an MBA from a well-regarded institution, I initially felt optimistic about her capabilities.

However, during what was supposed to be a routine walkthrough of our monthly close process, I was taken aback by her queries regarding depreciation expenses. She candidly questioned why our financials reflect what she termed “wasted money” on depreciation, indicating a profound misunderstanding of this essential Accounting principle.

To clarify, I explained that depreciation is a method of allocating the cost of tangible assets over their useful lives, allowing us to match expenses with the revenues they generate. Her blank stare after my explanation suggested I was speaking a different language. She retorted, “But we’ve already paid for the equipment. Why incur those expenses again?”

When I attempted to reference basic GAAP principles and shared relevant journal entries, I soon found myself engaged in a 30-minute discussion that felt reminiscent of an introductory Accounting class. Her confusion only deepened when I discussed our new $50,000 server acquisition and the rationale behind capitalizing it rather than expensing it all at once for immediate tax benefits. Despite my efforts to clarify concepts such as capitalization thresholds, she suggested we consult with our tax advisor because she believed the whole procedure seemed incorrect.

Adding to the peculiarity of the situation, she is responsible for ensuring the accuracy of our financial statements before they are presented to the board next week. This scenario raises significant concerns given the scale of our operations—a manufacturing company with annual revenues of $15 million—not a small startup where we might expect more leniency in Accounting practices.

Moreover, she expressed confusion about why our cash flow statement does not align with the profit and loss statement. My attempt to explain the distinction between net income and cash flow seemed to only muddle her understanding further.

Reflecting on this experience leaves me questioning how someone with her extensive background has missed grasping such foundational aspects of finance. It’s possible she thrived in positions where others handled the detailed work or, perhaps, her résumé contains some inflationary embellishments. Whatever the case may