In an era where financial agility is as critical as operational efficiency, a new study is shedding light on how controlling approaches can transform working capital management and, in turn, corporate profitability. Published in the Oradea Journal of Business and Economics, the research by Peter Bagdacs of the Institute of Accounting and Finance at the University of Debrecen, Hungary, examines how different controlling systems influence financial decision-making and liquidity management.
The study, which draws on extensive empirical findings, compares major international controlling models—including the German coordination-oriented, the Anglo-Saxon performance-focused, the Scandinavian sustainability-integrated, and the Japanese efficiency-centered systems. Each framework offers unique strengths in financial planning, monitoring, and performance optimization, but the research suggests that a hybrid, data-driven approach may be the key to unlocking long-term competitiveness.
“Efficient working capital management is strongly correlated with higher profitability,” Bagdacs explains. “But decision-makers must carefully balance liquidity and profitability to avoid financial instability.”
The research highlights the critical role of financial controlling in managing liquidity and cash flow, particularly through the lens of working capital components such as inventories, receivables, and short-term liabilities. Key financial indicators like the Cash Conversion Cycle (CCC), Net Trade Cycle (NTC), Return on Assets (ROA), and Gross and Net Operating Profits (GOP, NOP) are analysed to measure the efficiency of working capital use.
For the energy sector, where capital-intensive operations and volatile markets demand precise financial management, this research offers valuable insights. Energy firms often grapple with long cash conversion cycles due to the nature of their supply chains and project timelines. By adopting a more strategic controlling approach, these companies could improve liquidity management, reduce financial risks, and enhance profitability.
The study also underscores the importance of sustainability in financial decision-making, particularly in industries where environmental and social governance (ESG) factors are increasingly influencing investor and regulatory expectations. The Scandinavian sustainability-integrated model, for instance, emphasizes long-term value creation over short-term gains, a principle that could resonate with energy companies seeking to align with global ESG standards.
As businesses navigate an uncertain economic landscape, the findings suggest that a hybrid controlling system—one that incorporates precision, strategic alignment, sustainability, and continuous improvement—could be the future of financial management. For energy firms, this means not only optimizing working capital but also ensuring that financial strategies support broader corporate goals, from operational efficiency to sustainability.
Bagdacs’ research, published in the Oradea Journal of Business and Economics (translated from Romanian as the Oradea Journal of Business and Economics), provides a roadmap for financial managers, controllers, and organizational decision-makers looking to refine their approach to working capital management. As the energy sector continues to evolve, the lessons from this study could shape how companies balance liquidity, profitability, and sustainability in an increasingly complex financial environment.
