What Is a Point of Sale System?

Ask any retailer, “What is a point of sale system?” and they’ll tell you—it’s the central component of their business; the hub where everything merges.

The point of sale (POS) system is the place where your customer executes the payment for goods or services bought from your company.

Yamarie Grullon, manager of content strategy at POS provider ShopKeep, explains:

“A point of sale system is a combination of software and hardware that allows merchants to take transactions and simplify key day-to-day business operations.”

Yamarie Grullon, manager of content strategy at ShopKeep

This article examines the hardware and software components of POS systems. We’ll examine the key capabilities and the benefits they bring and highlight critical considerations for selecting a new POS system.

Software and Hardware Components of POS Systems

As we look at the components of POS systems, it’s first important to understand the software options available and what each requires.

Software Components

There are two common software deployment methods:

On-premise: A traditional software model. Purchase one or more licenses upfront for the software and install it on your computer system or servers. You’re in charge of updating and maintaining the software, which may require dedicated IT personnel for larger organizations.


Cloud-based: Also known as Software-as-a-Service (SaaS) POS solutions. You access and support the system via the internet. Don’t worry—if your internet goes down, most systems track sales and sync them once you’re back online.


We spoke with Marylise Tauzia, senior director of marketing with Revel POS System, to learn important considerations when navigating the nuances of POS software:

“Flexibility is key. Ensure your POS vendor works with the payment processor/gateway of your choice, so that you can control cost.”

Marylse Tauzia, senior director of marketing with Revel POS System

She goes on to point out that SMBs should verify that their POS integrates with any existing business applications to ensure no tech interruptions.

Hardware Components

Regardless of your chosen software deployment method, the hardware is the same. Grullon says the following hardware components are crucial for supporting POS software:

Crucial POS Hardware

Register screen Standard monitor that displays the product database. 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. Barcodes, when scanned, may also integrate with inventory management systems to automatically adjust stock levels.
Credit card reader Secure and EMV-compliant credit card readers are extremely important for retailers since the EMV payment standard went live in 2015, and non-compliant retailers face potentially huge losses on account of fraud liability.
Receipt printer Email and text receipts are gaining popularity, but paper receipts are still important for providing customers with a quick snapshot of their purchase. You can print employee sales totals, hours and other information.
Cash drawer It may fade away in the years to come, but cash is still king. And as long as it is, you need a secure place to store cash for transactions. Additionally, there are no credit card fees tied to accepting cash.

Retailers benefit greatly from the automation and organization POS hardware and software systems provide. However, it’s also important to understand how these components work together to help you overcome certain pain points.

Benefits and Must-Have Capabilities of POS Systems

Grullon points out that POS systems simplify crucial business operations:

“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.”

Many of these vital processes would be overly tedious and resource exhaustive to complete without the support of a modern POS system. But exactly what features should you be looking for?

An analysis of Software Advice’s free consultations with POS software buyers identified several must-have capabilities buyers seek in new POS systems. These include:

Must-Have POS Software Features

Even with all the benefits, our analysis found that 64% of single-store retailers aren’t using a POS system. These merchants are using a combination of manual methods, cash registers and, in some cases, QuickBooks or Excel for bookkeeping.

Tauzia with Revel POS suggests why retailers are hesitant to adopt new POS systems:

“Implementing new technology can be scary and overwhelming. As the POS is the central nervous systems of a business, it might be intimidating to think about replacing it. That’s why so many retailers have not made the switch yet.”

Tauzia also highlights the potentially negative consequences these retailers face:

“They 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.”

For a visual overview, check out our infographic: Advantages of POS Systems for Retail Operators.

Choosing the Best POS System for Your Business

Now that you know everything you need to know about POS systems, what’s your next step? If you’re choosing a POS system for the first time, Grullon encourages you to prepare meaningful questions that force vendors to give you definitive answers:

“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.”

Grullon recommends asking:

✔ Does the functionality of the system suit your specific business needs?

✔ How much does the software really cost?

✔ Is your only option to sign a contract?

✔ Are there any hidden fees?

✔ Is any hardware proprietary?”

Tauzia offers additional advice for selecting the best POS system for your store:

“[Make] a list of ‘must-haves’ and then [talk] to business owners who operate in a similar space about their experiences. 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.”

Next Steps

  • Check out the most popular retail POS systems. We’ve compiled the top retail POS solutions in our FrontRunners for Retail Management.
  • Complete a retail software questionnaire. The POS market is intimidating—especially for first-time buyers. This quick questionnaire will help you narrow down your POS options.
  • Read reviews from merchants like you. Once you have a shortlist of potential POS systems, read our real user reviews. These provide valuable insights you simply can’t get anywhere else.

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