NEARLY half of the insolvent companies in the north east failed because of poor management decisions.

And more than half of them had previous financial difficulties but failed to learn the lesson that help should be sought early on in a crisis.

These are the latest findings by R3, the Association of Business Recovery Professionals which sees the figures as proof of the need for better management education as outlined in a government report on customer rescue.

The figures arose from an R3 survey of 964 returned questionnaires, mostly from people who had experienced business failure.

Angus Martin, chairman of R3 for the Yorkshire region said that his organisation fully backed the government report. "In our opinion management education has been a low priority for far too long."

Mr Martin, of accountancy firm Deloitte & Touche also called for a "more enlightened" attitude by creditors towards customers in trouble.

He said: "Creditors get more money back if they support a rescue than if they force a liquidation. A rescue can be achieved by a number of methods depending on the problems that need addressing and the attitude of the company's creditors."

He urged managers to maintain communication with a firm in difficulty to avoid uncertainty. Up-to-date financial information and a clear, consistent credit control procedure helped to spot potential problems.

"Insolvency law traditionally puts creditors' interests first. However, the proposed changed to legislation envisage a new voluntary arrangement procedure with a stay on creditor action.

"This new tool for the rescue and reconstruction of small companies means that it is vital that creditors know their rights and understand how to evaluate a company's rescue prospects." he said.

R3 has produced two free booklets for firms wanting to know what to do in a crisis - Understanding Money and The Ostrich's Guide to Business Survival. Call Mr Martin on 0113 2439021 for a copy.