What Is a Point of Sale (POS) System?

by:
on September 22, 2019

Operating a retail store calls for a range of administrative, management and marketing skills. From ensuring that there’s enough inventory to putting together monthly sales reports, these skills are necessary in ensuring that your store runs smoothly.

Having an efficient point of sale (POS) system can go a long way in making sure that all your operations are running smoothly. In this article, we speak to two industry experts who’ll share tips on what you must have in a POS and how to choose the best option for your retail store or restaurant.

Marylise Tauzia

Product marketing and evangelism lead at Square

Yamarie Grullon

Director of content strategy and social media at ShopKeep

What’s the Point of a Point of Sale (POS) System?

A point of sale system, or POS, is the place where your customer makes a payment for products or services at your store. Simply put, every time a customer makes a purchase at your store, they’re completing a point of sale transaction.

The POS serves as the central component for your business; it’s the hub where everything—like sales, inventory and customer management—merges.

As evident as the benefits of a POS system are, we found that 56 percent of single-store retailers are still not using one. Instead, we found, many are still using a combination of manual methods, cash registers, QuickBooks and Excel for bookkeeping.

So why have retailers not taken that step to POS yet? To begin with, implementing new technology—especially technology that’s central to your business process—can be scary and overwhelming. Retailers need to consider the negative consequences of failing to have a POS in place.


“[Retailers] run the risk of slowing down their operations and missing critical data that could help them grow their business faster. Having key insight about their customers, their inventory level and when they should order more supplies are examples of information a POS provides.”

MARYLISE TAUZIA, PRODUCT MARKETING & EVANGELISM LEAD, SQUARE

Understanding what a POS system is—its software and hardware components, as well as capabilities—will enable you to make an educated buying decision.

Software Components of a POS System

Every POS system comprises of software and hardware components that make running the daily operations of your business easier and faster. It’s important to understand what POS software options there are and what each have to offer.

on premise vs cloud pos software comparison chart

When deciding what to look for in a POS software, Marylise Tauzia, product marketing and evangelism lead at Square, says ease of integration is imperative.

“Flexibility is key. Ensure your POS vendor works with the payment processor/gateway of your choice, so that you can control cost. If you’re already using applications important to your business, make sure the POS can integrate with them seamlessly, so that you can continue using them.”

Hardware Components of a POS System

These are the common physical components required to get your POS up and running.

Monitor/tablet: Displays the product database and enables other functions, such as employee clock-in and viewing sales reports. Tablets—especially iPads—are popular for replacing bulkier monitors.

Barcode scanner: Automates the checkout process. Scanning barcodes pulls product info and adds it to the checkout total. Barcode scanners can also integrate with inventory management systems to automatically adjust stock levels.

Credit card reader: Since the EMV payment standard went live in 2015, secure and EMV-compliant credit card readers are a must-have. Non-compliant retailers face potentially huge losses on account of fraud liability.

Receipt printer: Email and text receipts may be gaining popularity, but paper receipts remain essential for providing customers with a quick snapshot of their purchase or returns.

Cash drawer: It may fade away in years to come, but cash is still king. Until then, you’ll need a secure place to store cash for transactions. Another benefit of cash: there are no associated credit card fees.

Key Features of a POS System: What to Look for When Buying

Many tasks in a retail store can be overly tedious and resource exhaustive. With the right POS system, retailers have the ability to simplify crucial daily business operations with greater proficiency.

“Modern POS systems do more than just offer flexibility when processing daily transactions,” says Grullon. “They improve a merchant’s chances of success by providing them with tools to streamline business processes.”

Our analysis with POS software buyers identified key features that retailers and restaurants look for in selecting a POS system:

sales reporting customer management inventory management employee management pos software

Sales Reporting: On the surface, most POS systems enable you to look at your sales. The difference lies in how those numbers are presented, the ease at which data can be accessed and how much detail you get.

Your POS system should ideally be able to:

  • Generate detailed sales reports (based on product, hour, employee, total cost of items sold, total retail amount, net profit, profit percentage, gross margin)
  • Provide quick snapshots and charts on your store’s sales performance

Inventory Management: One of the most important functions of a POS system, inventory management, at its very essence, keeps track of all products so you know when it’s time to order/or not order specific products.

Your POS system should enable you to:

  • Scan and count products digitally
  • Manage your stock by creating product variations (size, color)
  • Identify pieces of inventory with a unique serial number
  • Track inventory levels across multiple locations
  • Enable seamless ordering such as automatically setting custom reorders of best-sellers
  • Consolidating purchases and orders in one order

Customer Management: Building strong relationships with your customers will lead to repeat business. A POS should have customer relationship management (CRM) to track all customer data.

Your POS system should give you the ability to:

  • Attach a sale/transaction to a customer
  • Keep track of your customers’ purchase history
  • Capture customer information such as name, age, birthday, phone number and email address
  • Use email marketing to keep in touch with them
  • More advanced systems will have a built-in loyalty program

Employee Reporting and Management: The performance of your employees can make or break the success of your store. Having the ability to set sales targets as well as know who your top performers are and who requires extra coaching will help increase sales.

Your POS system should give you the ability to:

  • Add employees to your system
  • Create and modify schedules for employees based on forecasted activity
  • Email schedules to employees
  • Track employees’ hours weekly and over time
  • Analyze who your top performers are

Choosing the Best POS System: Questions to Ask

If you’re choosing a POS system for the first time, start making a list of features you must have and talk to fellow business owners who are operating in a similar space. Ask what POS systems they’re using and what they like, or not like about them.

“Then start looking at solutions and make sure vendors cover the key points important to your business while also offering a secure, easy-to-use, easy to maintain and modern solution,” says Tauzia.

Usability and agility is vital in a POS. “It’s important to consider ease of use, flexibility in pricing, what actionable insights the system provides, data security, hardware durability and quality of customer service,” says Grullon.

Once you start talking to vendors, be sure to ask questions that demand definitive answers.

Some questions to ask:

Is the POS able to integrate with my existing software?

Do you have a website or accounting software? Choosing a POS that integrates with your existing setup will save you time and money.

What payment methods can the POS accept?

Double check that the POS is able to accept chip-enabled credit and debit cards. You’ll also need to have a EMV-compliant POS terminal.

How much does the software really cost?

POS systems can cost as little as a few hundred dollars each month to tens of thousands for a made-to-order solution. On average, about 46 percent of companies spend under $1,500 a year on their POS software.

Is your only option to sign a contract?

Signing on a dotted line means you’ll have to commit to the service until your contract ends, even if you don’t like it.

Are there any hidden fees?

Find out if there are any hidden fees involved in payment processing. These can come in the form of activation, downloads, early termination, refunds and transaction fees for different debit/credit cards.

Is any hardware proprietary?

Choosing a POS software vendor that offers proprietary hardware can save you time while offering smoother functionality. However if you’re looking to customize your setup, a proprietary solution can be restricting as it’ll only be compatible with equipment from the same company.

Next Steps in Buying a POS system

1. Research the most popular retail POS systems. We’ve compiled a list of the top retail POS solutions in our FrontRunners for Retail Management. These are the POS systems that are most recommended by fellow business owners for their usability.

2. Complete a retail software questionnaire. For first-time buyers, the POS market can be hard to navigate. This quick questionnaire will help you narrow down your options with what your business needs.

3. Read reviews from fellow businesses owners. Once you’ve come up with a shortlist of potential POS systems, check out what businesses like yours are saying about them. Finding out whether real people are satisfied should enable you to make an informed buying decision.

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Three Emerging Retail POS Technologies That Will Benefit Retailers

Retail Challenges: Could Replacing Your POS System Help?

5 Must-Have Retail POS Software Features to Streamline Your Small Business

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