Strengthening Financial Performance: The Role of Internal Control Systems in Micro and Small Enterprises

Internal control is a key tool for addressing management challenges, improving organizational efficiency and effectiveness, preventing misconduct, and integrating management functions. To ensure its effectiveness, the internal control system must remain sufficient. Therefore, this study aimed to assess the internal control system and financial performance of service-based businesses in Santiago City, Philippines, focusing on the control environment, risk assessment, control activities, information and communication system, and monitoring. Using a simple random sample, 90 business owners were surveyed. The study adopted a quantitative approach with a descriptive correlation and comparative design to highlight significant differences. The data was collected through a structured questionnaire distributed via Google Forms and face-to-face surveys. Reliability and validity tests were also performed on the questionnaire. The results revealed that business owners assessed their internal control and financial performance, with significant differences observed in risk management based on business years and total net income but no significant differences based on other demographic factors,