Scottish SMEs are sitting on £50 billion of cash in their bank accounts that leaves them vulnerable to attack and loss of value from inflation, according to new research.

Whilst the vast majority of the cash mountain merely reflects the normal ebb and flow of funds into and out of bank accounts, a significant number of businesses have considerable amounts of ‘surplus or excess’ cash, says an SME banking specialist.

Murdoch MacLennan, a partner with Azets, says cash may be king, but “risks include the potential for internal and external fraud, cyber-attack, threats of litigation with the cash effectively being ring-fenced by legal action, unexpected demands for payments and the insidious loss of value from inflation and inertia.

“Critically, first and foremost cash should be protected with the company structure and internal controls reviewed to ensure they are fit for purpose.

“Surplus cash can then be focused on strategically important activities, for example, mergers and acquisitions, new plant and machinery, staff recruitment and retention, product R&D and tax-efficient pension contributions. 

“Reduction of debt should also be a major focus, particularly given that the cost of borrowing has risen significantly.”

Mr MacLennan added: “The volume of cash in Scotland’s businesses reflects a vibrant SME economy and whilst surplus cash is very desirable, it must be managed as an asset and safeguards put in place to minimise the risk of loss”.