The study examined the effect of financial management practices on the profitability of small and medium enterprises (SMEs) in Bundibugyo District, Uganda. SMEs play a vital role in employment creation and local economic development; however, many SMEs in Bundibugyo District had continued to record low profitability and high failure rates, largely attributed to weak financial management practices. The study was guided by three specific objectives: to examine the effect of budgeting practices on the profitability of SMEs, to assess the relationship between cash flow management and SME profitability, and to evaluate the influence of financial record-keeping practices on SME profitability in Bundibugyo District. The study was anchored on the Pecking Order Theory and the Resource-Based View (RBV) Theory. The Pecking Order Theory assumed that SMEs prioritized internal financing due to limited access to external credit, emphasizing the importance of effective internal financial management for profitability. The ResourceBased View theory assumed that internal capabilities such as budgeting, cash flow control, and recordkeeping constitute strategic resources that enhance firm performance. These theories were relevant inexplaining how internal financial practices influenced profitability in resource-constrained rural settings. A descriptive cross-sectional research design with a quantitative approach was adopted. The target population comprised 337 SME owners, managers, employees, and key stakeholders in Bundibugyo District, from which a sample size of 267 respondents was selected using census and simple random sampling techniques. Data were collected using structured questionnaires. Data analysis was conducted using the Statistical Package for Social Sciences (SPSS), employing descriptive statistics, Pearson correlation analysis, and multiple regression analysis. Findings revealed that budgeting practices had a significant positive effect on profitability, with an overall mean score of 3.60 (SD = 1.31), indicating moderate to high adoption of budgeting practices among SMEs. Pearson correlation results showed a strong positive relationship between budgeting practices and profitability (r = 0.621, p < 0.01). Cash flow management also demonstrated a significant positive relationship with profitability (r = 0.684, p < 0.01), indicating that SMEs that effectively managed cash inflows and outflows recorded higher profit margins. Furthermore, financial record-keeping practices were found to have a statistically significant influence on profitability (r = 0.657, p < 0.01), with SMEs maintaining complete and regularly updated records reporting better financial performance. Regression analysis indicated that financial management practices jointly explained 58.3% (R² = 0.583) of the variation in SME profitability. The study concluded that financial management practices significantly influenced the profitability of SMEs in Bundibugyo District. Budgeting practices, cash flow management, and financial record-keeping were identified as critical determinants of SME profitability. The study recommended that SME owners and managers should strengthen budgeting, cash flow monitoring, and record-keeping practices, while government agencies and development partners should enhance financial literacy training and provide targeted support programs to improve SME profitability and sustainability.