Financial Expertise as A Moderator of the Relationship Between Working Capital Management Practices and Financial Sustainability of Food Processing Firms in Mbarara City, South-Western Uganda

Abstract

Financial sustainability remains a persistent challenge among food processing firms in developing economies, despite their contribution to employment creation, value addition, industrialisation, and local economic development. Although effective working capital management is widely recognised as essential for maintaining liquidity, profitability, solvency, and business growth, its effectiveness may depend on the financial expertise of those responsible for implementing financial decisions. This study examined the moderating effect of financial expertise on the relationship between working capital management practices and the financial sustainability of food processing firms in Mbarara City, South-Western Uganda. The study was anchored principally in Human Capital Theory and the Resource-Based View and employed a cross-sectional research design under a sequential explanatory mixed-methods approach. The study population consisted of 74 registered food processing firms, from which 62 firms were sampled. A total of 186 respondents were targeted, of whom 162 participated, representing an 87% response rate. Quantitative data were collected using structured questionnaires, while qualitative evidence was obtained through semi-structured interviews with managers. Quantitative data were analysed using descriptive statistics, Pearson correlation, and hierarchical moderation regression, while qualitative data were subjected to thematic analysis. The findings revealed that working capital management practices initially explained 55.1% of the variance in financial sustainability (R² = .551). Introducing financial expertise increased the explained variance to 57.9%, while incorporating the interaction terms increased the model's explanatory power to 61.5% (R² = .615; ΔR² = .036). The interaction between financial expertise and cash management was positive and significant (β = .142, p = .018), as were financial expertise × inventory management (β = .118, p = .031) and financial expertise × receivables management (β = .105, p = .044). Qualitative findings corroborated these results by demonstrating that financially competent managers were better able to forecast cash requirements, control expenditure, optimise inventory, enforce credit policies, and interpret financial information. The study concludes that financial expertise is not merely an independent managerial resource but an important boundary condition that strengthens the conversion of sound working capital practices into financial sustainability. Food processing firms should therefore complement improvements in working capital systems with deliberate investments in financial knowledge, skills, experience, professional development, and financially competent personnel.