The SHG has complained businesses are at risk of closing amid delays and confusion caused by the system, which is designed to break chains of Covid transmission.
Anyone who has symptoms or tests positive for the virus is asked to self-isolate at home for ten days, as do those who have been in close contact with that person.
SHG spokesperson Stephen Montgomery claimed the system was “severely testing”, but not actually helping keep people safe.
He said: “There are two camps currently within Scottish hospitality – premises that are closed or those that will have to close. No-one will escape it and it’s primarily due to system delays.
“The lag in the Test and Protect teams coming back to businesses has forced operators to weigh up the cost of closure versus risk of infection.
“Responsible operators by nature of their trade are opting to shut, but at a cost of £15,000 per average sized business with much needed turnover being lost, this is not viable.
“Tragically, for smaller owners, it is pushing them even deeper into the red and to the point of no return.
“As an industry, of course we agree with the principle of testing and tracing to stop transmission, but ultimately it has to be underpinned by a robust system that actually works.”
Mr Montgomery warned that when coupled with the hospitality staffing crisis, it was the perfect storm to see businesses go under.
He said: “Enough is enough. We now need reassurance from the Scottish Government that there will be some sort of financial compensation for businesses that are having to close because of the flawed Test and Protect system.”
The owner of Signature Pubs Group Nic Wood accused the Scottish Government of being “no help whatsoever”.
Running a private pub company with 21 venues in Scotland, Mr Wood explained things were so bad his company was forced into devising their own 12-point system.
He said: “We’ve had incidents where a member of staff has tested positive, but we’ve not been contacted by Test and Protect.
“We’ve taken track and trace completely out of the picture because they’re not reacting quick enough.
“We are not getting any help on this. We are business owners making decisions conscious of safety and welfare of staff and customers.
“It seems pretty irresponsible from a government standpoint that we are the ones making the decisions for ourselves.
“It's so useless and so irregular we’ve had to do this ourselves.”
At Friday’s coronavirus briefing, First Minister Nicola Sturgeon suggested there was a “misunderstanding” of how the system worked.
She said: “Test and Protect is working really well under huge pressure, but the more demand, the more that pressure is going to be, so I’m not trying to say there are not issues here.
“But it is meeting the WHO [World Health Organisation] 80 per cent target. For argument’s sake, say there is a delay with Test and Protect – this is where I think there’s a bit of a misapprehension – that doesn’t change the amount of time that somebody has to isolate for.
“Whatever the time Test and Protect is taking, that’s not extending anybody’s period of self-isolation.”