The relationship between inventory handling procedures and the financial performance of SMEs in Kampala District, Uganda quantitative, correlational, cross-sectional survey.

Background Liquidity is a precondition to ensure that firms are able to meet their short-term obligations, and its continued flow can be guaranteed from a profitable venture to guarantee efficient financial performance. Moreover, 40% of the SMEs in Kampala close down operations after two years of operation. This study aimed to investigate the relationship between inventory handling procedures and the financial performance of SMEs in Kampala district. Methodology A quantitative, correlational cross-sectional research design was employed, utilizing self-administered questionnaires to collect data from 5 SME directors, 159 SME employees, and 10 Uganda Investment Authority officials. Results The study recorded relatively high, 80% and 94.3% response rates among SME directors and Employees, respectively, and a lower rate, 60% among UIA (Uganda Investment Authority) employees. The majority, 62.5% were male compared to females, 37.5%, 56.9% were aged 31-45 years, and 71.3% were married. There was a strong positive correlation (r = 0.597) between inventory handling procedures and the financial performance of SMEs positive correlation between inventory handling procedures and financial performance. The Beta coefficient of 0.14 suggests that for every unit increase in inventory handling procedures, financial performance increases by 0.14 standard deviations. The T-value of 2.115 is significant at the 0.05 level. Effective inventory handling procedures were strongly associated with improved financial performance. Conclusion Effective Inventory handling policies contribute to efficient operations within SMEs. When these policies are well implemented, they smooth cash flows, reduce operational risks, and improve financial outcomes. Correlational findings underscore the importance of effective financial policies in driving the financial performance of SMEs in Kampala District. Recommendation SMEs should evaluate and refine their inventory handling policies to adapt to changing business environments and maximize their financial performance. Enhance and ensure that the financial policies of SMEs are well-coordinated and aligned with their overall business objectives.