Title: A Disconcerting Gap in Expertise: Insights from Our New finance Director
In a surprising twist at our manufacturing firm, we’ve recently welcomed a new finance Director with an extensive background – boasting over 20 years in corporate finance, a history with a Big 4 Accounting firm, and an MBA from a well-respected institution. However, what should have been an exciting addition to our team has quickly turned into a perplexing situation.
Just about six weeks into her tenure, I found myself walking her through our monthly closing process when a comment stopped me in my tracks. She expressed confusion over depreciation expenses, questioning why we “waste money” on them each month if we aren’t spending anything. Initially, I assumed she was joking or perhaps putting me to the test, but as the discussion unfolded, it became clear that her inquiry stemmed from a genuine lack of understanding.
I explained that depreciation is a fundamental Accounting principle that allocates the cost of tangible assets over their useful lives, ensuring that expenses align with the revenue those assets generate. In response, I was met with a bemused expression and the rhetorical question, “But we already paid for the equipment. Why are we expensing it again?” This prompted me to delve deeper, illustrating journal entries and reaffirming that this is a staple of Generally Accepted Accounting Principles (GAAP).
To my surprise, she requested a step-by-step breakdown of concepts that are typically covered in an introductory accounting course. For an additional layer of complexity, she raised concerns about why we couldn’t classify our recent $50K server purchase as an immediate expense to secure a tax benefit for the current year rather than spreading it out over time. My explanation of capitalization thresholds and the classification of assets versus expenses seemed to further perplex her, leading her to suggest we consult our tax advisor for confirmation on these practices.
As if that weren’t enough, she also disclosed her bewilderment over the discrepancies between our cash flow statement and the profit and loss statement; her confusion only deepened when I clarified that net income and cash flow are distinctly different metrics.
With a revenue of $15 million, our company operates on a scale where foundational knowledge of finance and accounting is not only expected but critical. It leaves me questioning how someone with two decades of experience in finance could navigate her career without a clear grasp of these essential concepts. It’s a challenge that raises concerns about whether she has been coasting in her previous roles or if there might be an instance of dramatic resume inflation
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