8 Tips Every Aspiring SME CFO Should Know To Master Business Ethics

SME CFOs can take practical steps to ensure business ethics are safeguarded. Photo by Towfiqu barbhuiya on Unsplash

The words ‘business’ and ‘ethics’ are now so synonymous and crucial to the ongoing success of an organisation or brand, that senior business leaders, such as CFOs, need to have appropriate measures in place to safeguard their bottom line from any controversy.

That’s exactly why Steve McNally, CFO of The Plastic Technologies Inc. Group of companies recently shared eight practical tips for current and aspiring CFOs, to promote ethical business practices in small to medium-sized business.

Steve McNally’s Tips to Create Ethical Guardrails

  1. Tone at the top. During my career at the Fortune 500 consumer goods company, we were instructed in the company’s leadership model beginning from day one and we were held accountable to living those core values accordingly. To the extent you haven’t already done so, define your organisation’s values, operating philosophy, and standards of conduct, expressing these expectations in value statements, ethical codes, company policies, and communications. Then you, your CEO, and other leaders must “walk the walk,” ensuring your actions reflect the expectations and behaviours expected of the broader organisation.
  2. Company code of conduct. To significantly increase ethical awareness, formally document your organisation’s business code of conduct, train employees on how it applies in real-life situations, and require them to acknowledge they understand and follow it (potentially including annual certifications).
  3. Conflict of interest policy. In conjunction with your overall company code of conduct, you should specifically clarify your policy regarding conflicts of interest (i.e., situations where an employee’s personal interests and professional responsibilities may be in conflict). Such a policy should provide examples of potential conflicts, outline the steps to be taken if an actual or perceived conflict arises, and define the potential consequences of being out of compliance (up to and including termination).
  4. Delegation of authority. Based on my experience, many private SMEs are loose in terms of delegation of authority, whether related to routine purchases, one-time expenditures, and/or capital investments. By formalising who has what authority, you can empower your team, build their trust and personal accountability, increase operational efficiency, reduce your personal workload, and generally enhance control.
  5. Segregation of duties.Ensuring effective segregation of duties in a smaller business can be challenging due to limited personnel. Even so, you should analyse roles and responsibilities and then address the highest risk areas. You should ensure roles and responsibilities are clearly defined, train the team on their responsibilities, and hold them accountable. And you should consider cross-training. For example, cross-train a backup for your payroll associate and require the backup to run payroll at least quarterly.
  6. Complete and timely reporting. As CFO for an SME, juggling multiple priorities with limited resources and lacking the incentive of external reporting requirements, becoming lax is a legitimate risk, especially if your cross-functional partners aren’t pressing for these reports. Does it really matter if we skip accruals this month? Does anyone care if the monthly financial reports aren’t issued until Day 10, Day 25, or Day 90? It is a slippery slope. But without complete, accurate, and timely reporting, the leadership team’s ability to make good decisions is impaired.
  7. Cross-functional accountability. Cross-functional business partners are also juggling multiple priorities with limited resources. They can easily go about their daily routines without considering the financial impact or ethical implications of their decisions. To ensure cross-functional accountability, jointly develop budgets, align on risk tolerance, provide analysis to support key decisions, and engage your partners in monthly business reviews.
  8. Personal awareness and support. Although professional ethics is in our DNA, small business CFOs will surely face unique ethical challenges and pressures. By participating in ongoing ethics training, creating a sounding board of CFO peers, or even reaching out to the IMA Ethics Helpline if needed, you will ensure your team is making ethically sound decisions along the way.

As someone who has traversed CFO roles in both Fortune 500 companies and in the SME sector, Mr Nally’s tips are an invaluable insight into what current and aspiring CFOs can do to fortify their organisation, in an era where business ethics will always be under close scrutiny.

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