Struggling with Fundamentals: A Confounding Experience with a New finance Director

Recently, our company welcomed a new finance Director with an extensive background in corporate finance, boasting over 20 years of experience, a Big 4 pedigree, and an MBA from a well-regarded institution. Given her impressive credentials, I anticipated a seamless integration into our finance team as a senior accountant who reports directly to her.

However, as we navigated the monthly closing process, I found myself in a rather surprising situation. When I turned to explain the concept of depreciation, her puzzled response threw me off guard. She questioned the need for what she referred to as “wasting money every month on depreciation expenses despite not actually spending anything.” Initially, I assumed this was a test of my knowledge.

I carefully broke down the explanation of depreciation as a method for allocating the cost of tangible assets over their productive lives, ensuring that expenses align with the revenues generated during those periods. Her reaction was telling—she responded with a blank stare and curious disbelief, asking, “But we already paid for the equipment. Why are we expensing it again?”

I attempted to clarify further, even referencing generally accepted Accounting principles (GAAP) and showcasing the relevant journal entries. Her request for a step-by-step walkthrough took us down a lengthy 30-minute explanation that frankly seemed more suited for an introductory Accounting class.

The conversation took another unexpected turn when she inquired about the potential for expensing a new $50K server to optimize our tax situation in the current year, instead of distributing the costs over time. My clarification regarding capitalization thresholds and the distinction between assets and expenses was met with skepticism. She suggested we consult our tax advisor, seemingly unconvinced by the Accounting rationale.

What raised further alarm was her confusion over our cash flow statement not aligning with the profit and loss statement. When I explained that net income and cash flow measure different aspects of financial health, I could practically see the gears in her mind struggling to make sense of it all.

As a manufacturing company generating $15 million in revenue, our operations are firmly grounded in sound accounting principles—not in the chaotic environment often found in smaller startups where one might expect such fundamental misunderstandings.

Reflecting on her two decades of experience in the finance sector, I am left questioning whether she has truly engaged with the complexities of the field, or if her impressive resume is simply an example of inflated credentials. With board reviews of our financial statements just around the corner, I can’t