MANY companies that fail and leave a string of bad debts behind them often leave a trail of tell-tale warning signs months before their eventual insolvency, say experts.

Companies in trouble have a "long history of classic signs of borderline solvency" that should alert suppliers to the risks of dealing with them, warns corporate recovery specialist Begbies Traynor.

A significant number of financially-troubled businesses appear to have been operating at borderline solvency for 12 months or longer.

Begbies Traynor examined 574 companies with assets of more than £10,000 that went into administration during the first six months of 2004:

almost three quarters (74 per cent) were late by at least 12 months in filing their annual accounts with Companies House - "a classic sign of a company experiencing major trading difficulties";

18 per cent had County Court Judgements made against them in 2003 for unpaid debts;

20 per cent had been petitioned to be wound-up by an unpaid supplier in 2003 or 2004.

"Recent legislation has made it simpler and quicker for directors of companies in financial difficulty to seek the protection of an administration order without the delay and expense of a court hearing," said Begbies Traynor's Nick Hood.

"In our experience, the sooner directors act to face up to their problems, the better chance they have of saving their business and protecting jobs.

"If they ignore the situation and end up in liquidation, they may well run the risk of wrongful trading, which can lead to the directors being held personally liable for some or all of the debts," he added.

In the year to June 2004, the region with the highest number of administration orders was the South East with 40 per cent followed by the Midlands (18 per cent) and the North East (17 per cent).