When Expertise Falls Short: A Candid Look at Financial Fundamentals

In recent weeks, our company onboarded a new finance Director—a move that signals growth and ambition. With an impressive background boasting over 20 years in corporate finance, experience with a Big 4 Accounting firm, and an MBA from a noteworthy program, she seemed like the perfect fit for our senior team. However, as we began the monthly closing process, I encountered a surprising challenge that has left me questioning her grasp of foundational financial concepts.

During our walkthrough of the financial close, she posed a question that took me aback: “Why are we wasting money each month on depreciation expenses when we’re not actually spending anything?” At first, I assumed she was joking or testing my knowledge. After all, depreciation is a standard concept in Accounting practice. I patiently explained that depreciation is a systematic allocation of the asset’s cost over its useful life, ensuring that expenses align with the periods deriving value from those assets. To my astonishment, she responded with blank bewilderment, insisting, “But we’ve already paid for the equipment. Why are we expensing it again?”

When I referred to Generally Accepted Accounting Principles (GAAP) and attempted to walk her through the journal entries, she requested a more simplified step-by-step review, claiming, “This seems unnecessarily complicated.” After half an hour of outlining lessons typically taught in introductory accounting courses, a new layer of confusion emerged: when discussing our recent $50K server purchase, she inquired why we couldn’t just expense it immediately for a tax write-off rather than spreading the cost over time. Despite my explanation of capitalization thresholds and the distinction between assets and expenses, she maintained a skeptical tone, suggesting we confer with our tax advisor to verify the accuracy of my explanations.

What truly alarmed me was learning that she is responsible for reviewing our financial statements for accuracy ahead of our upcoming board meeting.

To provide context, we operate as a $15 million revenue manufacturing company—not a startup where basic accounting principles might not be laid down as firmly. Additionally, she expressed confusion when our cash flow statement didn’t align with the Profit & Loss (P&L) statement, struggling to understand the core difference between net income and cash flow.

This experience has led me to reflect on her two-decade-long career in finance. It raises critical questions about how she has navigated this field without a solid grasp of these fundamental principles. Is it possible she has been relying on others for the details while holding