The study examined the relationship between financial records keeping practices and performance of Small and Medium Enterprises (SMEs) in Kawempe Division, Kampala City, Uganda. Using a cross-sectional survey design, the study collected data from 156 SME owners and managers through structured questionnaires and financial document analysis. The findings revealed a strong positive correlation (r = 0.756, p < 0.001) between financial records keeping and SME performance. Specifically, SMEs that maintained comprehensive financial records experienced 43% higher profitability, 51% better cash flow management, and 38% higher access to formal credit compared to those with poor record-keeping practices. Only 34.6% of surveyed SMEs maintained complete financial records including income statements, balance sheets, and cash flow statements, while 41.7% kept partial records, and 23.7% maintained minimal or no formal records. SMEs with proper record-keeping systems showed average annual revenue growth of 28.3% compared to 11.7% for those without adequate records. The study found that specific record-keeping practices including cash books (r = 0.698), sales records (r = 0.712), inventory records (r = 0.684), and expense tracking (r = 0.673) were significantly correlated with improved financial performance. Major barriers to effective record-keeping included lack of accounting knowledge (68.6%), time constraints (54.5%), perceived cost (47.4%), and absence of legal enforcement (39.1%). The study concluded that financial records keeping was a critical determinant of SME performance and sustainability. It was recommended that SMEs should adopt systematic record- keeping practices, government should provide subsidized training programs, financial institutions should link credit access to record-keeping standards, and professional associations should offer affordable bookkeeping services tailored to SME needs.