BPP Study book activity 12 Chapter 3: Working Capital Investment.

Hi Mr. John,

I need clarification on the following if you don’t mind.

The question is as follows:

Velm Co sells stationery and office supplies on a wholesale basis and has annual revenue of $4,000,000. The company employs four people in its sales ledger and credit control department at an annual salary of $12,000 each. All sales are on 40 days’ credit with no discount for early payment. Bad debts represent 3% of revenue and Velm Co pays annual interest of 9% on its overdraft.
Velm Co is considering offering a discount of 1% to customers paying within 14 days, which it believes will reduce bad debts to 2.4% of revenue. The company also expects that offering a discount for early payment will reduce the average credit period taken by its customers to 26 days. The consequent reduction in the time spent chasing customers where payments are overdue will allow one member of the credit control team to take early retirement. Two-thirds of customers are expected to take advantage of the discount.
So, to get the benefit of saving the overdraft cost, what I did was:
Receivables before offering the discount: 550,000 (which was given in the balance sheet)
Receivables after the implementation of the discount= (2/3*14/365*4,000,000)+ (1/3*26/365*4000000)= 197,260
Which gave the reduction in receivables 352,740
But in the solution they provided to get the new receivables figure they did the following:
4,000,000*26/365= 284,932.

I’m really confused, why “the payment within 14 days of purchase” was never included in the calculations?

Thanks in advance.