Cashflow and festival season

ith almost half a million visitors set to descend on the capital this month, Edinburgh is already seeing Festival season take over.

Scotland is known worldwide for its tourism industry, which now contributes more than £11 billion to its economy each year.

As part of this growing industry, music tourism in Scotland is also thriving. While the Fringe Festival is a huge draw, Scotland is also home to events such as Glasgow’s TRNSMT and Perth’s Rewind Festival, both providing multi-million-pound boosts to local communities.

According to the most recent statistics from UK Music’s Wish You Were Here, in 2016 £334 million was generated by music tourism in Scotland by 1.2 million people who came to attend music events, while nearly 4,000 fulltime jobs were sustained by the industry.

Many local businesses will be capitalising on this influx of tourists and increased demand in what can be a “feast or famine” industry.

This will have a particular impact on small to medium sized enterprises (SMES). These businesses need to ensure they are managing cashflow as effectively as possible during peak season as overtrading can have as serious an impact as a lack of cash in the offseason. In addition, SMES need to be aware of potential lengthening of payment times due to summer holiday impacts, which could affect cash flow or a firm’s working capital.

Our recent Working Capital Index report found that Scottish businesses have £32.2bn tied up in excess working capital. This is money that, if managed more effectively, could be released into cash and used to invest in growth or pay down debts.

This affects businesses right across the tourism sector in Scotland. Being aware of income and expenditure and the timing these are due in or out will make it easier for a business to forecast its cash flow accurately and allow them to cope should payments be delayed.

Working in what is a seasonal industry, using invoice finance or assetbased finance can also help businesses in the tourism and hospitality sectors to secure funding against balance sheet assets.

We also believe in continually developing strong relationships in both the private and public sector, using a collaborative approach to advise and support customers within the industry. We advise businesses to do the same by working with agencies and industry bodies such as Visitscotland, Scottish Enterprise, Highlands & Islands Enterprise and chambers of commerce.

With the tourism sector booming here in Scotland, I urge businesses to work together to help strengthen relationships within local communities and plan ahead by looking at working capital options to ensure continued success for years to come. l Fraser Sime is regional director for Scotland at Bank of Scotland