You should also analyze your collection problems first to identify whether late payments are systemic or limited to a few customers. If 80% of customers pay within 10 days before offering a discount, providing a discount would be unwise and just result in lower revenues. However, if late payments are prevalent among customers, a discount might be advantageous.
 If you have ongoing needs for cash in order to make payroll and purchase raw materials, getting paid in 10 days rather than waiting 30 days will be worth offering the discount. If you have to borrow money in order to meet day-to-day expenses before you are paid, then it is definitely to your advantage to offer the discount.Some clients such as the government have rules that require paying in no less than 30 days.Set fixed policies and provide to all customers based upon the volume of business.
 The customer might take the discount and still pay you at 30 days. Then you will have to make a collections call. The customer could also pay you within 10 days some months but 30 days in other months, which makes it difficult to plan your cash flow. Also if you are offering the discount every month to a number of different customers, the amount of revenue you are losing can really add up.Consider the relative strength between the vendor and the buyer. Large, national customers regularly take discounts, especially where the product or service is readily available elsewhere, and still pay late, knowing the vendor doesn't want to chase off a big client.
 Factoring means selling your accounts receivable to a company in order to get immediate payment at a discounted amount. Then your customer would pay the factoring company.For example, you might have $20,000 due from one of your customers. You could sell this receivable to a factoring company for $18,000.
Most factors have recourse, so the risk of non-collection remains with vendor.
Analyze cash flow and cash collection cycle.
Consider the advantages of offering early payment discounts.
Consider the disadvantages of offering early payment discounts.
Consider factoring instead of customer discounts.
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