Small and Medium Enterprises (SMEs) play an important role in every developing country contributing to the growth of the economy in many ways. The aim of this study is to identify the effect of financial management practices on performance of SMEs in Sri Lanka: Special Reference to North Central Province (NCP). Working capital management practices, Investment appraisal practices, Capital structure management practices, financial reporting & analysis practices and Accounting information system practices were identified as independent variables and Performance of SMEs was identified as the dependent variable of this study. All SMEs (nearly 2000 SMEs) operating in NCP during the year 2019 was identified as the population of this study. Out of that, 322 SMEs were selected as the sample based on disproportionate stratified random sampling method and final sample was 245 manufacturing, service and trade SMEs operating in NCP. Data was collected through a structured questionnaire distributed among SMEs functioning in NCP. Descriptive statistics and inferential statistics like Pearson correlation analysis and multiple regression analysis were used to analyze data using the SPSS package. Results of the study revealed that there is a positive effect of financial management practices on performance of SMEs. Among financial management practices, working capital management practices and capital structure management practices have a significant positive effect on SMEs performance. Keywords: Capital structure, Financial Management, Performance, Small and Medium Enterprises, Sri Lanka, Working capital.

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In Sri Lankan context Small and Medium Enterprises (SMEs) play a vital role and contribute in significantly to the economic growth and social development through job creation, poverty alleviation and new business development, but on the other hand there are many failures of SMEs due to poor record keeping practices, inaccurate accounting information, reason to inaccurate financial performance and to make poor financial decisions. Therefore, many of SMEs die off soon after their establishments and face financial and management challenges. The purpose of this study is to identify the effect of accounting record keeping practices on financial performance of SMEs in Anuradhapura district. Preparing accounting records (PAR), preparing financial statements (PFS), computer utilization (CU) and respondents' perception (RP) used as independent variables to measure the accounting record keeping practices. Financial performance (FP) was used as the dependent variable of this study. The research was based on the quantitative research method and the data were collected from 152 SMEs in Anuradhapura district using a structured. Descriptive analysis, correlation analysis and multiple regression analysis used to analyze collected data according to SPSS 25 version. Results revealed that accounting record keeping practices show a positive effect on financial performance of SMEs and preparing financial statements have a significant effect on SMEs financial performance. So, SMEs should highly concern about record keeping practices as one of the tool to improve and increase the financial performance and relevant authorities should develop specific guidelines and must provide templates of account record keeping practices for SMEs to make them very easier and familiar with account practices.