It seems strange but you are not allowed to bring large amounts of rupees into Sri Lanka. For foreign currencies the limit is much higher (US$5,000 or corresponding amount in another currency, everything higher must be declared). Be careful! Importing currency from India or Pakistan is illegal. So sooner or later you will reach the point when you have to exchange your money.
ATMs
The first possibility is to simply withdraw the money from an ATM. Their exchange rates are usually better than changing cash in an exchange bureau. The fees depend on your credit card. Visa and MasterCard are widely accepted. You can also change money inside the bank but the rates are usually slightly worse than drawing rupees from the ATM.
Exchange bureaus
Exchange bureaus are easy to find in Colombo, at airports and in tourist areas. They accept major currencies like US-Dollars, GBP and Euros. Generally they do not charge a commission and their exchange rates compete with the banks. Do not change your currency at unlicensed money changers on the street. They seem to have better rates but there is a very high chance it is scam. Even though they count the money in front of your eyes, through a sleight of hand, you could well end up out of pocket.
There is also the possibility to exchange money in hotels. This is convenient but the rates are usually bad or you have to pay an additional fee.
Do not forget to change your money back before leaving the country because you are not allowed to export many rupees (maximum of Rs 5,000) nor do many foreign banks exchange the Sri Lankan currency.