The Surprising Gap in Expertise: When Your New finance Director Stumbles on Basics
About six weeks ago, our organization welcomed a new finance Director, and with her extensive resume featuring over 20 years in corporate finance, a background in one of the Big Four firms, and an MBA from a well-respected institution, expectations were understandably high. As a senior accountant reporting directly to her, I was eager to collaborate and learn from her wealth of experience.
However, during our recent discussions about the monthly closing process, I encountered an unexpected challenge. While explaining the intricacies of our financial practices, she questioned the rationale behind depreciation expenses, expressing genuine confusion over why we “spend money every month on something we aren’t actually paying for.” At first, I thought it was a lighthearted test, a benign way to gauge my knowledge.
When I attempted to clarify the concept, I explained that depreciation is a method of allocating an asset’s cost over its useful life, aligning the expense with the revenue generated from that asset over time. Nevertheless, she seemed perplexed and countered with, “But we already paid for the equipment. Why are we reporting it as an expense again?”
Her lack of familiarity with basic Generally Accepted Accounting Principles (GAAP) left me astonished. Despite walking her through the journal entries meticulously, she requested a step-by-step breakdown, asserting that it felt overly complicated. I dedicated 30 minutes to covering foundational topics typically found in introductory Accounting courses.
The scenario escalated when she inquired about expensing our $50K server immediately to capitalize on this year’s tax write-off instead of depreciating it over time. When I elaborated on the importance of capitalization thresholds and the distinction between an asset and an expense, she suggested that we consult our tax advisor, stating, “This just doesn’t seem right.”
The most troubling aspect? She is supposed to review our financial statements for accuracy before their presentation to the board next week.
For context, our company generates $15 million in revenue in the manufacturing sector, a far cry from a small startup where less formal Accounting practices might be acceptable. Just yesterday, she questioned why our cash flow statement “doesn’t match the P&L,” demonstrating her confusion between net income and cash flow.
This experience has left me questioning how someone with two decades in the finance field could be unaware of such fundamental principles. It raises concerns about whether her previous roles involved others handling the critical details, or if perhaps her resume requires
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