Many people ask, “What is POS or point-of-sale system?” A point-of-sale system for retail management is something you might have heard of if you happen to be the owner of a growing or well-known business. A POS system can help you manage and process your customers’ payments for anything they purchase from you.

“POS” was synonymous with the cash register before the digital era. However, recently, most companies have decided to move towards completely digital systems that connect sales, accounting, customer relationship management (CRM), inventory management, human resources, and various other business functions through cloud technology. You should consider implementing this POS system for your business, as this investment will likely yield great returns shortly and in the long run.

However, it’s important to know that there are various POS systems, and selecting the one most suitable for your business can be quite difficult. To help you make a well-informed choice regarding the best POS system for your business, here is a helpful guide explaining how POS systems operate, the different types of POS systems you can buy today, and how to choose the most appropriate POS system for your specific needs.

What is POS?

Starting with the basics, a point-of-sale system consists of hardware and software tools to help you complete sales in your business. The point of sale is where the purchasing happens. For example, in a salon, a customer might be paying for a haircut they just got. A grocery store could have a cashier weighing produce, scanning products, and accepting customer payments.

These examples only show what a point-of-sale system looks like on the outside. A POS system includes digital programs and physical devices, but it also has parts that work without being noticed. Many POS systems automatically track inventory every time someone buys something. They can also observe sales data to help store owners make smarter business choices.

The features of a POS system rely heavily on the specific system your business decides to invest in. The amount of equipment included in the POS system varies between different systems. Still, most systems, at a minimum, come with a cash register, terminal screen, barcode scanner, credit card reader, and receipt printer. While all these components are necessary, you’ll typically find them together in a single all-in-one POS system. Some store owners purchase the components individually from various suppliers and then figure out how to integrate them to create one complete POS system.

You need to remember that a POS system is more than just a cash register. Although it includes cash registers, it covers much more than just this. Although some small businesses still use cash registers and calculators that make basic receipts, modern POS systems still need to update this old method. POS systems use current technology to make checkouts easy and track useful data points.

How a POS Works and the Advantages of Using a POS System

Before deciding among the various types of POS systems in the market, it’s wise to learn how a POS system is meant to function and how crucial a successful POS upgrade can be for your organization. With that in mind, here’s a brief overview of what you should anticipate from your contemporary POS system.

Parts of a Digital POS System

No matter which type of POS system you choose to onboard for your company, nearly all digital POS systems have the same essential elements. They include the core POS software, specific hardware components such as bar code scanners and credit card readers, and a network of internet-connected devices like desktop computers, laptops, tablets, or mobile phones.

A digital point-of-sale system needs to be able to perform the following essential functions:

Invoicing for all real-time orders and sales transactions and other types of transactions like repairs, rentals, and purchases from suppliers

Payment processing handles various payment methods, from cash to credit and debit cards, and digital money from e-wallets.

Inventory management checks all items listed on the POS, ensuring that the business can always maintain an accurate count of the number of products available on its shelves or within its warehouse locations.

Instant financial reporting gives the business owner and staff a complete view of the business’s financial status and overall health.

Customer relationship management (CRM) helps track customer behavior and interaction trends with your business’s brand.

Certain products include extra features immediately, such as recording employee logins, managing payroll, handling receipts, and overseeing multiple stores. The extent of your POS system’s features depends on factors like the type of product you choose and how easily it can be customized. That’s why exploring your options and choosing the right one is important.

The Advantages of a POS System

By using a POS system, your business could gain the following benefits:

Improved Accuracy

Cashier mistakes can easily cost a retail business as much as one-third of its yearly profits. A POS system eliminates the need to key in items and prices manually. It greatly lowers the risk of human error and provides far more accuracy than a basic cash register.

Simple Reporting

Handling reporting might seem overwhelming for your business. A POS system can make it easier by offering reports with valuable real-time data. This data helps you make smart decisions that guide you towards achieving success.

Inventory Management

You can also use a POS system to manage your inventory. A high-quality POS system will make it easy to keep track of your product sales and inform you when it’s time to order more stock.

Speedy Service

Speed and convenience are expected by consumers now more than ever before. A POS system can allow you to give it to them by facilitating quick transactions. It’s an excellent alternative to serving your customers manually.

Additional Payment options

Modern brands need to provide multiple payment options at checkout. Customers will appreciate using their preferred payment options, like a debit or credit card, Apple Pay, Venmo, or Zelle.

Types of POS systems

There are two primary kinds of POS systems: on-premise and cloud-based.

On-premise POS Systems

With an on-premise system, the software is installed and kept on a server in your facility. The server may look similar to a touchscreen monitor or desktop computer. Once you invest in an on-premise POS system, the data it stores is available without ongoing data hosting fees.

On-premise POS systems have some downsides, however. You’ll have to pay for technical support, software licenses, and training fees to maintain and upgrade the system. An on-premise POS system also requires the physical space to store its architecture, database, and more. These costs can add up very quickly.

Cloud-based POS Systems

A cloud-based POS system is installed remotely and connected to the Internet. You can monitor your business from anywhere when your data is stored remotely. You can also set up your POS system to update automatically, saving valuable time otherwise dedicated to manual updates.

Before you move forward with a cloud-based POS system, figure out who will own the data. Ensure you know how the system is backed up and recovered to avoid issues if you switch providers. Also, if you experience internet connectivity issues, you can access your data once it’s restored.

Other System Types

In addition to on-premise and cloud-based systems, there are subcategories of POS systems which include the following:

Mobile POS (mPOS)

Mobile POS systems let you accept payments on a mobile device. This is ideal if you run a food truck, home repair services, or other business constantly on the go.

Retail

Retail POS systems are made specifically for retail environments. They let you track customer profiles, offer discounts, sell gift cards, and provide purchase orders.

Multichannel

Multichannel POS systems can integrate with your website, social media, third-party marketplaces, and other channels.

As you explore POS platforms, you’ll notice not all systems are created equally. This is why you’ll need to research and consider several factors. Consider your industry and business goals — for example, if you’re a restaurant, you’ll likely need a different POS solution than a clothing boutique.

POS System Components

POS systems will typically include the following hardware components:

POS Terminal

The POS terminal is the central control system that controls the whole thing.

Barcode Scanner

It scans barcodes and adds discount codes. It’s used with POS systems.

Receipt Generation

A lot of customers like to keep tabs on their purchases. A POS will come with a printer that can create paper receipts but usually also provides the option to generate digital receipts.

Credit Card Machine

Using a credit card machine allows you to handle payments made through credit or debit cards.

Cash Drawer

While many customers prefer to pay with a card, a cash drawer offers a safe, secure place to store funds, checks, vouchers, and receipts.

Scale

A scale is important if you sell products by weight. It can make charging customers a lot easier.

How a POS System Works

POS systems provide the following baseline capabilities:

Keep Track of Inventory

Managing inventory can be daunting, whether products are at your store, a warehouse, or a third-party fulfillment center. POS software helps minimize guesswork and manual errors. It can also ensure you have enough products in the right place at the right time.

Manage Customer and Sales Data

A POS system lets you collect and track customer information such as names, addresses, and order histories. You can use this data to pinpoint your most loyal customers and better understand the customer segments you plan to target.

With a POS system, you can also track key metrics like in-store and online sales, sales per employee, and sales per channel. This information is essential for making informed, data-driven business decisions.

Fulfillment Options

To succeed in today’s increasingly competitive marketplace, you must find creative ways to boost sales. A POS system can make this easier by offering in-store pickup, home delivery, and in-store returns for online purchases. This type of flexibility is a great way to appeal to your customers while diversifying your revenue stream.

Choosing a POS system

There are countless POS systems on the market. The following tips can help you select the best one for your business.

Define Business Needs

Almost every POS system out there can help you manage inventory and sales. However, it’s essential to define your particular business needs. Do you need a POS system that accepts various payment options? Is reporting important for your sales team? Look for a system that offers features most relevant to boosting your brand value.

Come Up with a Budget

POS systems vary in price. While some are basic and less expensive, others are equipped with more modern features and, therefore, come at a higher price point. Ask yourself how much you’d like to spend on your POS system and preferred pricing model. Remember that the least expensive option is only sometimes suited to your needs.

Look Into Customer Service

Unfortunately, it will cost you money any time your POS software malfunctions. For this reason, consider what you need from a customer service perspective in case of a system failure. Are you okay with waiting a few days for a response via phone or email? Or is online chat or round-the-clock support a must-have?

Features Your POS System Should Have

Before you purchase a POS system, ensure it has the following features at a minimum.

Inventory Management

Your POS system must allow you to process payments and track inventory. Ideally, it should integrate with your enterprise resource planning (ERP) software so you can receive detailed inventory and customer behavior insights.

Customized Reporting

Ensure your POS system can automatically run and create inventory, sales, and accounting reports. These reports are essential to various business departments.

Multiple Payment Options

A POS system that accepts various payment options is critical. Look for a solution that accepts virtual payment options such as Venmo, Zelle, and Apple Pay. This can allow you to accommodate a wider range of customers.

Customer Relationship Management

A good POS system should be able to record customer information and track their purchases. It’s important to identify what items they purchased, how much they paid for them, the payment methods used, and whether or not they returned what they bought.

Make a POS System a Part of Your Customers’ E-commerce Experience

A POS system can revolutionize your e-commerce experience. Integrating with your e-commerce store eliminates manual data entry, keeps tabs on inventory in real-time, offers cross-channel promotions and customer incentives, and supports in-store returns and pickups.