Navigating Confusion: A Senior Accountant’s Experience with a New finance Director

In an unexpected turn of events, our organization recently welcomed a new finance Director, a decision that seemed promising given her extensive background. With over 20 years in the corporate finance landscape, including experience at a Big Four firm and an MBA from a well-regarded institution, I anticipated a strong addition to our team. However, my initial enthusiasm rapidly transformed into concern during our recent interactions.

As a senior accountant, I work closely with the Finance Director and have been guiding her through our monthly financial close process. Just yesterday, our discussion took a surprising turn when she questioned the purpose of depreciation expenses, expressing genuine confusion about why we “waste money every month on something we’re not actually spending.” At first, I assumed she was testing my understanding of the subject, but I soon realized that she truly did not grasp this fundamental concept.

I took the time to explain that depreciation is essential for allocating the cost of our assets over their useful lives. This practice matches our expenses to the periods that benefit from the asset, thus providing a clearer financial picture. Unfortunately, my explanation was met with a blank stare, coupled with the incredulous remark, “But we already paid for the equipment. Why do we need to expense it again?”

In an effort to clarify, I demonstrated the journal entries in accordance with Generally Accepted Accounting Principles (GAAP). However, she insisted I break it down step by step, claiming it seemed overly complicated. I spent a considerable half-hour revisiting concepts typically covered in an introductory Accounting course.

Our conversation didn’t stop there. She raised concerns about our new $50,000 server purchase, suggesting we should just expense it immediately for tax benefits rather than discussing capitalization thresholds and asset classification. When I outlined the rationale behind these Accounting principles, she suggested, rather bluntly, that we “check with the tax guy,” clearly not aligning with the established practices.

What adds an element of urgency to this situation is the fact that she is responsible for reviewing our financial statements for accuracy ahead of their presentation to the board next week.

For context, our company operates in the manufacturing sector with a revenue of $15 million. This isn’t a small startup where one might expect a lack of formalized accounting knowledge.

In further discussions, she also expressed confusion over why our cash flow statement did not align with the profit and loss statement, indicating a misunderstanding that net income is not synonymous with cash flow.

Given her