What do we mean by internal control cost and firm value?
Internal control applies to accounting first; let me discuss maintaining internal control in any business.
You understand the business will have many expenses, so when you start the company, you must forecast the costs and prepare your budget showing possible amounts you might need in every category. That helps you avoid unnecessary expenses because you will monitor your daily expenses and check your budget; that is internal control. And the same applies to the income; make some predictions about the sales and keep doing the same.
In the same way, prepare a cash flow and follow the same procedure comparing the actuals and forecast figures. It also goes under internal control. With all these, do not forget to prepare your profit and loss accounts to check your financial status if you want to make financial decisions regarding your business.
So, by analyzing your profit and loss account, you will know whether your business is profitable. If you think it is not good, you have to check your product or services and analyze whether they need any modifications, and you have to have detailed sales records.
If you think some of your products are not selling well, you have to decide whether to get rid of the product or make some modifications. All these are internal controls, but we mainly talk about accounting. Continuing with a product that does not give you enough sales is unsafe.
Then, on the other hand, you can research your product’s pricing, so you need to have a pricing strategy in your business. You cannot charge a higher or lower price; the higher price will reduce your sales, and a lower price means it might not cover the cost of production.
There is no cost involved in maintaining internal control in your business; it does not raise your company’s value depending only on the internal control. Many things are involved if you want to increase the value of your business.