Antithesis Ltd sells its service on credit at the rate of £6 million a year. Customers take varying lengths of time to pay, but the average is 65 days. The business does not experience any significant level of bad debts because it spends £50,000 a year on trade receivables collection procedures.

The business is considering a proposal to introduce a cash discount of 2 per cent of the amount due if customers pay within 30 days of the sale. It is estimated that 60 per cent of customers would pay on the thirtieth day and claim the discount. The remaining customers would be the slower payers who would be expected to take an average 75 days to pay. The cost of trade receivables collection procedures would be expected to fall to £20,000 a year. The cost of funds to finance the trade receivables is 12 per cent p.a.

In terms of effect on profit (after interest, before tax), should the proposed trade receivables policy be introduced?