Navigating Unique Challenges with New Leadership: A Cautionary Tale from the finance Department

Recently, our company appointed a new finance Director with over 20 years of experience in corporate finance, a distinguished background in Big 4 Accounting, and an MBA from a well-respected program. On paper, this seemed like a promising hire. However, my recent interactions with her have sparked significant concern about her grasp of fundamental Accounting principles.

In a recent meeting intended to walk her through our monthly financial close process, I was caught off guard when she expressed confusion over the concept of depreciation. She questioned why the company incurs “wasted” expenses on depreciation each month when no actual cash is leaving the business. Initially, I thought she was joking. My efforts to clarify the importance of depreciation—explaining that it distributes the cost of assets over their useful lives and aligns expenses with the respective periods—seemed to fall on deaf ears.

Her response indicated a disconnect with standard Accounting practices. While her qualifications highlight years of expertise, she appeared puzzled by the rationale behind expensing equipment that had already been paid for. Despite my attempts to clarify GAAP principles, she requested a step-by-step breakdown, indicating that she viewed these fundamental concepts as unnecessarily complex.

The discussion turned even more perplexing. She inquired why we couldn’t expense a new $50,000 server all at once to maximize our tax deductions for the current year rather than recognizing the expense gradually. When I referenced the distinctions between assets and expenses, along with capitalization guidelines, she suggested we consult our tax advisor, expressing skepticism about our approach.

As if that weren’t enough, I was surprised by her queries regarding discrepancies between the cash flow statement and the profit and loss statement. She struggled to understand the difference between net income and cash flow, which are basic concepts entrenched in accounting education.

This situation has left me reflecting on the potential implications for our organization. How does someone with such an extensive background navigate their career without mastering these principles? It leads to questions about whether her past roles involved substantial delegations to others, or if the validity of her experience warrants a thorough reevaluation.

In a company that generates approximately $15 million in revenue, the expectation is that our leadership is equipped with a firm understanding of core accounting concepts. As we prepare our financial statements for the upcoming board meeting, I can’t help but hope that our new Finance Director’s insights do not jeopardize the accuracy and integrity of our reporting.

As we progress with this leadership