Calculate payment timing across terms.
Stated terms and actual behaviour differ, so expected days to payment is the term plus your client's habitual delay — that is the number cash-flow planning should use. Offering an early payment discount buys the money sooner at a price, and annualising that price shows how expensive it is: 2% to be paid roughly a month early works out far above typical borrowing rates.
Payment timing and discount cost
Expected days = term days + average days late; annualised discount cost = discount/(100 - discount) x 365/days accelerated x 100
Because the money arrives when the client pays, not when the contract says. Building the average delay into forecasts is what prevents a technically profitable month from causing a cash shortfall.
Yes. Annualised it typically lands in the double digits, so it only makes sense when the alternative is more expensive credit or a genuine cash crunch.
Invoice on delivery rather than month-end, state a specific due date, and follow up the day a payment slips. Those tend to move the average-days-late figure more than a discount does.