Title: A Shocking Encounter: When a finance Director Lacks Basic Accounting Knowledge
In the fast-paced world of corporate finance, one would expect a high level of understanding regarding foundational Accounting principles, especially from someone in a leadership position. However, my recent experiences with our new finance Director have left me astounded and raising eyebrows.
About six weeks ago, we welcomed a new Finance Director to our team. With over 20 years of experience in corporate finance, a background with a prestigious Big 4 firm, and an MBA from a well-respected institution, she appeared to be an exceptional addition to our company. As a senior accountant reporting directly to her, I was optimistic about the potential for collaboration and growth.
However, during our recent walkthrough of the monthly close process, an alarming conversation unfolded. When discussing depreciation, she questioned the legitimacy of this expense, stating, “Why are we wasting money every month on depreciation expenses when we’re not actually spending anything?” At first, I thought she was testing my knowledge, but her genuine confusion quickly became apparent.
I attempted to clarify that depreciation is a method used to allocate the cost of tangible assets over their useful lives, ensuring that expenses are matched with the revenues generated during those periods. After a lengthy explanation, she still struggled to grasp the concept, asking, “But we already paid for the equipment. Why are we expensing it again?” Despite my efforts to simplify the explanation, she requested a step-by-step walkthrough of basic GAAP principles, which was surprising for someone in her position.
The discussion took another unexpected turn when she proposed that we should expense our new $50K server upfront to maximize our tax deduction for the current year. I explained the necessity of capitalization thresholds and the distinction between assets and expenses. Her response? A suggestion to consult the tax department because it “didn’t seem right.”
To add to my concerns, she was expected to review our financial statements for accuracy before their presentation to the board next week. This level of oversight raised serious questions about her comprehension of fundamental financial statements. In a company generating $15 million in revenue, one would not anticipate encountering such a lack of basic knowledge.
During the same conversation, she expressed confusion over why our cash flow statement did not align with the profit and loss statement, bewildered that net income could differ from cash flow. These fundamental concepts should be foundational for anyone in her role, and it’s left me questioning how someone could progress through 20 years of finance without
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