Interacting with vendors is something you’re going to have to do sooner or later in your company or business. Vendor interaction can either be negotiations, decisions, and terminations. In this article, we’re going to discuss everything you need to know about vendor termination letters.
Companies make the mistake of focusing more on deciding and negotiating with vendors and neglecting that sooner or later, you’re going to terminate them. While this isn’t foretelling that all vendor relationships will go sour, it is customary to think about terminations while appointing.
Before we go into the nitty-gritty of this article, who are vendors, and why are they important?
What/who Is a Vendor?
Vendors are individuals or organizations that provide either goods or services to consumers or companies. Vendors are more suppliers than manufacturers. While this is not the case in every scenario, it is in most. So, when sending vendor termination letters, ensure you understand if the vendor is merely a supplier or a manufacturer. Writing your letter with this difference in mind will ultimately make your letters better.
If you’re a company that deals primarily in products, you will send more vendor termination letters than other businesses. An example of this is a mart. Suppose you work in a mart or an establishment where most of your products are directly from vendors; with this high number of vendors, it is only logical to keep a vendor termination letter handy.
You’ll still need a vendor termination letter if you’re not a mart or don’t mainly deal in products. An example is if your office receives a regular supply of products, this can be anything from snacks to stationery; you will also send a vendor termination letter. While you may not send as much as someone running a mart, you will be sending regardless.
What Are the Common Reasons for Terminating Vendors?
There’s a myriad of reasons for terminating relationships with vendors. While the main reason for terminating a vendor is bad service rendered, you could end services with a vendor if you don’t need them anymore. In this section of this article, we’re going to list some of the most common reasons to terminate vendor relationships.
- Failure to meet contract terms: Before you get into business with a vendor, proposals are received, and contracts are signed. If a vendor fails to hold up their end of the bargain, this is enough reason for termination.
- Supply Charges: Vendors can increase supply charges for reasons best known to them. If these charges exceed what you’re willing to pay, the best recourse would be to terminate the service.
- Bad Products: Nothing ruins vendor relationships more than receiving bad products. If you’re unable to notice these faults until after they leave your shelves, that creates a whole new world of problems for you. In this case, hiring a new vendor would be the best course of action. Especially if the current one remains unrepentant.
- Service: Receiving lousy service from a vendor ultimately affects how you service your customers. If a vendor continues to offer terrible services and is unrepentant, you are within your rights to end relationships with them.
- Inefficient delivery: If you run a customer-facing business, the quality of your delivery almost ultimately relies on your vendor. Especially if the products in question are not on-demand. So, to ensure you continuously provide excellent services, prioritize delivery.
- Cost: The difference in cost of goods is another common reason most vendor relationships end. If a vendor’s goods are higher than you’re comfortable with and you find a vendor that charges less for the same goods, it’s enough reason to change vendors.
How to Write a Vendor Termination Letter
We’ve discussed what a vendor is and why they’re essential. Now, let’s discuss how to write the best vendor termination letters.
- Follow the contractual process: Before writing a vendor termination letter, ensure you follow the contractual process. As said earlier, you must reach an agreement before getting into business with a vendor. And in this agreement, a termination process would be duly stated. To avoid legal problems, ensure you follow the due process written in your contract.
- Warning letter: If you’re canceling a vendor relationship due to bad service, it is unusual to do it right off the bat without prior notice. A warning letter to the vendor giving a grace period is standard practice. In this letter, ensure to state a time frame for action for termination.
- Request Acknowledgement: It doesn’t matter if you’re sending a warning letter or the actual termination letter. Ensure to request acknowledgment. This is important as the vendor could claim they did not receive your letter, making the entire process much more tedious.
- Schedule a meeting if appropriate: Depending on your relationship with the vendor, the best action plan would be to undergo the process on a call. This way, it would be near impossible for the vendor to claim ignorance of your decision to terminate the relationship.
- Seek legal counsel: Like most business correspondence, vendor relationships are contractual. As such, you must seek legal counsel before making decisions to ensure you follow due legal process.
Vendor Termination Template One
[Your Company's name] Company's address] [City, state, ZIP code] [Phone number] [Date] [Vendor Company's name] [Company address] [City, state, ZIP code] RE: Formal Termination of Contract To Whom it May Concern, In continuation of our warning letter sent on the [date warning letter was sent] to address the [recipient of the letter] We listed our concerns and complaints and our action if those complaints didn't meet a resolution. The time allowed for remediation has since elapsed, and as a result, we are effectively terminating the contract between us as of [Date of termination]. All outstanding invoices will be processed within the next 7 days. If you have any questions, please reach out. Kind Regards, Name and Position
Vendor Termination Template Two
[Your Company's name] Company's address] [City, state, ZIP code] [Phone number] [Date] [Vendor Company's name] [Company address] [City, state, ZIP code] RE: Formal Termination of Contract We are writing to inform you that we will no longer require your services as we've decided to go with another distributor. [State reason for cancellation] As stated in the contract, we're offering a two-week notice period. As such, this termination will come into effect on [Date]. All outstanding payments will be handled within 7 days of termination. Kind Regards, Name and Position
Vendor Termination Sample One
Woculus Inc. 123 Darwin Avenue Houston, Texas. 001122 123 456 7890 12 June 2022 Brandon and Sharon Foods 442 Charles Avenue Houston, Texas. 012233 RE: Formal Termination of Contract To Whom it May Concern, Continuing our warning letter sent on 12 June 2022 to the head of consumer goods. We listed our concerns and complaints and our action if those complaints aren't resolved. The time allowed for remediation has since elapsed, and as a result, we are effectively terminating the contract between us as of 12 June 2022. All outstanding invoices will be paid within the next 7 days. If you have any questions, please reach out. Kind Regards, Name and Position
Vendor Termination Sample Two
Afripup Investment Company 44 Southwest Indie, Dallas, Texas. 11223 098 765 4321 18 June 2023 Orange Foods LTD. 67 Bourne Street, Dallas, Texas. 90786 988 4657 2333 RE: Formal Termination of Contract We are writing to inform you that we will no longer require your services as we've decided to go with another distributor. We've called your customer center and sent repeated emails complaining about the state of the foods delivered and have been met with static silence. Your product threatens the health of our customers. As a result, we have to terminate our contract with you. As stated in the contract, we're offering a two-week notice period. As such, this termination will come into effect on [Date]. All outstanding payments will be handled within 7 days of termination. Kind Regards, Name and Position
Conclusion
We’ve included everything you need to know about terminating vendor relationships. We’ve also included samples to help you write the best termination letters. These samples should serve as guides whenever you need to write vendor termination letters.
Check out more Vendor Termination Letters Templates and Samples
