Abstract:
Efficient financial management practices are considered as an essential mechanism for small and medium
enterprises to gained profitability, survival, insolvent, growth etc. The objectivity of this study is to determine the
effect of financial management practices of small and medium-sized enterprises (SMEs) in Sri Lanka on their
financial performances. The study investigated financial management practices are through working capital
management practices, investment management practices, financial planning practices, financial reporting and
analysis practices and accounting information system. Financial performance is measured through return on assets
and return on investment. In this study 60 of small & medium enterprises which operate in Gampaha district
selected as the sample and personally administered questionnaire distributed among SMEs owners to collect the
data. According to the correlation and regression analysis result of the study shows that there is a significant
positive effect on working capital management practices on the financial performance of SMEs at the Gampaha
district in Sri Lanka. It implied that increasing working capital management practices are a reason for improving
the financial performance of SMEs. According to the findings, the researcher concludes that application and
integrating financial management practices are reasonable for improving the financial performance of SMEs. The
study recommended that owners of SMEs should pay high attention to financial management practices when it
operates, formatting decisions and strategies and government and other regulated authorities should formulate
appropriate policies and provide facilities for successful implementation of financial management practices in
SMEs in Sri Lanka.
