Cracking Hershey's AR: Sweet Secrets to Financial Success

Bouncing back from AR setbacks with effective strategies and technology tools.

4th October, 2023


faster payment collection


days average DSO (2018-22)


lower open deductions


shorter DSO and CCC


I grew up relishing Hershey’s chocolate bars.

Now, with a major in finance, I decided to check out the company's receivables management practices and how it fares vis-a-vis competition. 

I was left intrigued by how despite a lower DSO, they had a longer cash conversion cycle than Hershey's competitors. Here’s all that I found out from my analysis.

Hershey's DSO is lower than that of peers

DSO is an indicator of how fast a company collects from customers. A lower DSO means faster collections. 

From 2018 to 2022, Hershey’s average DSO was 26 days. This is lower than the industry average of 33 days and much lower than its peers, Nestle’s and Mondelez’s, average DSO of 49 days. Hershey’s DSO is nearly 45% lower than that of its rivals.


Average DSO (2018 – 2022)







Food and Beverage Industry Benchmark


Factors that drive Hershey’s low DSO

Here are some reasons why Hershey’s has a lower DSO than its peers.

Digital sales: >One of the key factors driving Hershey’s lower DSO is its active foray into digital commerce. Online sales, which are one of Hershey’s success factors, are direct-to-consumer and help shorten the DSO. Hershey operates its own digital channels for sales ( as well as sells via retailers’ e-commerce sites. E-commerce transactions for Hershey’s are 1 – 3.5 times bigger than their brick-and-mortar transactions.

Strong retailer partnerships: McLane Company, a leading wholesale distributor in the US, holds more than a quarter of Hershey’s accounts receivable and almost 30% of its net sales. With a primary chunk of AR concentrated with one vendor, collections are likely to be easier, resulting in a lower DSO. But it also increases the company’s credit risk, though no major credit losses have been reported.

Streamlined AR management: Hershey’s has an automated AR management system that allows it to process credit quickly, auto-match payments with invoices, apply cash in real-time, and reduce open deductions by 40%. This improves visibility into cash flows and helps reduce DSO.

Despite low DSO, Hershey’s CCC is higher!

The Cash Conversion Cycle (CCC) shows how fast Hershey’s turns materials into cash after sales. It is influenced by its DSO, DPO (the time it takes to pay its suppliers), and DIO (the time taken to sell inventory).


Hershey’s CCC of 48 days is higher than Nestle’s 20 days and Mondelez’s -28 days. 

Reasons for Hershey’s High CCC

Here’s why Hershey’s CCC is higher than that of peers.

Shorter Days Payable Outstanding (DPO): Hershey pays suppliers faster, within 46 days. Nestle and Mondelez pay their suppliers more than 100 days after receiving the invoices. While this doesn’t allow Hershey’s to keep cash in hand for longer, it enables them to have stronger supplier relationships and the power to negotiate better pricing, discounts, and terms. 

Supplier Finance Program: Hershey’s Supplier Finance Program allows suppliers to sell all or a part of their receivables from Hershey’s to a third-party financial institution. The financial institution pays the suppliers the invoice amount(s), enabling them to realize cash faster. Hershey’s pays all invoice amounts on their respective due dates to the financial institution.

Hershey’s receivables turnover ratio is higher


The Accounts Receivable Turnover (ART) ratio indicates how fast a company collects from customers. A higher ratio means faster collections and stricter credit policies.

Hershey’s ART ratio in 2022 was 14. It collects payments almost 2X faster than Nestle (7.4) and Mondelez (8.7).

Nestle’s and Mondelez’s operations are spread in more locations globally than Hershey’s, which predominantly has a strong US presence. The difference in credit terms and collection strategies across locations is likely a reason for the difference in ART ratios.

Hershey’s bad debt is slightly lower than competitors

In line with the other AR metrics discussed here, Hershey’s reported slightly lower revenue write-offs compared to peers. 

Hershey’s bad debt-to-sales ratio of 0.30% is a tad lower than Nestle’s 0.34% and Mondelez’s 0.32%.

Modelez has increased its allowance for credit losses to account for probable write-offs due to the Russia-Ukraine war. It registered a 32% jump in its accounts receivable against a 10% sales growth in 2022 YoY. 

Mondelez (20%) also had the highest increase in bad debt in 2022 compared to Nestle (12%) and Hershey’s (-10%).

Everything wasn’t sweet for Hershey’s AR a few years back

Hershey’s had a challenging period between 2014 – 2015. They faced a decline in sales, a loss of market share, and lower profits and cash flow. The firm battled with supply chain issues, limited innovation, and inefficient processes.

To improve its financials, including cash flow, Hershey’s streamlined its AR process with automation solutions. They also launched online channels to make sales and payment collection easier and faster.


This helped them reduce their DSO from 30 days in 2015 to 24 days in 2022. Hershey’s also grew account receivable turnover by over 1.5X during this period.

The shortened collection period boosted cash flow. It enabled Hershey’s to increase investments across R&D, product development, and marketing. This helped them increase their revenue by 41% between 2015-2022. Today, they enjoy 34% of the US market share for chocolates.

Hershey’s 2023 plans

Hershey’s emphasis on digital sales, robust supplier relationships, automated receivables processing, and high accounts receivable velocity has helped it lower its DSO and improve collections.

This efficient working capital approach has allowed Hershey’s to generate strong cash flow. Equipped with financial stability, Hershey’s has ambitious expansion plans. 

It aims to double production capabilities and marketing spending in 2023 to fuel top-line growth, especially in its salty snacks division. 

Hershey’s also aims to transition to newer technology platforms, improve sourcing visibility, and strengthen ESG performance. Powered by diligent financial management and strong cash flows, Hershey’s is well-positioned to scale its operations further.

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