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Decoding POS Systems for Business

What you’ll learn


  • What is a point of sale (POS) system?
  • What are the various types of POS systems?
  • How to choose your best-fit POS system?

Many tedious business jobs have been made easy today because of the availability of affordable automation solutions. The point of sale (POS) transaction operation is one among them. Point of sale signifies the time and the location where a retail transaction is completed. Whenever a buyer makes a purchase by completing the required payment, a point-of-sale(POS) transaction is completed. Let’s take a deeper dive into the concept and benefits of POS and learn how to identify the best-fit POS system for your business model.

What is a point of sale(POS) system?

A point of sale(POS) system denotes the place where customers make payments for the products or services that they purchase. This also includes the software and the hardware(e.g. POS terminal, smartphones, etc.) that facilitate the process of managing the buy, return and exchange transactions.

According to Grand View Research, the global market for point-of-sale terminals is estimated to reach $125.9 billion by 2027.

Businesses adopting POS system

How does a POS system work?

A POS system helps receive payments from customers and track sales. However, the processes and tools used may vary from business to business. Businesses use online platforms, mobile phones, and on-site servers or legacy systems to complete POS transactions.

Many businesses today use POS systems that only require a good internet connection. Such online POS systems are useful for quick and easy fund transfers and help make collections smoother. Some businesses may use a POS system that accepts offline payments, making it easier for the retailers and the customers to close the transaction even without an internet connection.

A POS system directs customers through a sequence of stages for a successful purchase. Here is how the process works.

How does a POS system work?

Step 1: Customer picks the product or the service

This is when the customer adds your product or service to the shopping cart and gets ready for the checkout process.

Step 2: POS system price the items

The POS tool computes the cost of the items in the shopping cart, including sales taxes and discounts on them. POS software also identifies customer loyalty points, promo codes, and discount vouchers that customers might have, and calculates the final price accordingly.

Step 3: Customer pays you

Customers make payments with their credit card, tap card, debit card, loyalty points, gift card, or cash to complete the transaction. Depending on the mode of payment chosen by your customer, the transaction must then be authorized by the customer’s bank.

Step 4: Finalize the point-of-sale transaction

Once the payment has been accepted, the POS machine generates a digital or printed receipt. POS machines that are integrated with your accounting system will then share this data to complete the entries in your financial records.

What are the different types of POS systems?

Multiple POS devices

In the table below, we discuss the different types of POS systems available in the market today.

Types of POS Systems Used by
POS Apps 

(Cloud-based applications that can be downloaded onto any device that supports them)

Businesses that run on a strict budget, and require a versatile and portable point-of-sale system
Mobile POS Systems

(Software system with mobile accessibility)

Traveling merchants or retailers who require mobile solutions for on-spot sales
Touch Screen POS Systems

(System that operates on different types of touch screens such as smartphone, tablet, and computer)

Businesses that seek to expedite the ordering and checkout processes
Cloud POS Systems

(Systems that are totally hosted online and use cloud storage)

Businesses that wish to get reports and POS data from any location
Open Source POS Systems

(Software that can be used and modified for free)

Businesses that want to build proprietary systems using in-house technical expertise
Multichannel POS Systems

(System that enables a business to engage with customers through multiple channels)

Omnichannel retailers, who need to sync stock levels
Self-Service Kiosk POS Systems

(System that allows customers to scan and pay for their own merchandise or service)

Quick-service businesses with self-service checkout options

What components are commonly included in a POS system?

All POS systems use POS software; however, not all companies require POS hardware. It all depends on your sales channel—online or retail. If your sales happen through your website, then you don’t need POS hardware for payment collections. However, if you accept physical payments(cash on delivery or on-spot cash payment), you may require a register and a credit card reader.

Here’s an overview of common types of POS hardware and software.

Hardware components of a POS system

Some hardware devices associated with POS systems include barcode scanners, cash drawers, keyboards, and receipt printers.

Register
Automatic money handling system that registers and calculates transactions.

Monitor/tablet
Displays the list of the products or services that have been provided and enables functions such as checking sales reports.

Card reader
Enables customers to pay with their credit and debit cards without any hassles.

Cash drawers
Cash drawers are used to store the cash safely. POS software linked to a cash drawer can reduce fraud by tracking when the drawer is accessed.

Barcode scanners
Scannable barcodes readily capture the code and retrieve the pre-fed information about the product. It also helps confirm the pricing, stock level, and other information.

Software features of a POS system

POS systems offer a variety of features including payment processing, customer data management, and inventory level tracking.

Payment processing
Integrates credit cards, debit cards, e-wallets, internet banking, and other modes of payment into the checkout process on the POS system.

Inventory management
This feature in POS systems tracks the stock level and stores key product data.

Employee management
POS systems can track employee activity—data access, working hours, etc. It allows you to set security levels on the system to control sensitive information access.

Customer relationship management (CRM)
A CRM tool that integrates with the POS software can store customer contact information and purchasing history, and manage loyalty programs.

What are the benefits of point of sale systems?

An efficient point of sale (POS) system ensures that all your transactions are complete and accurately recorded. It boosts productivity and saves time by automatically tracking transactions and matching the cash in the register with that in your records. Here are some of the significant benefits that POS systems provide to businesses.

Benefits of POS System

Multiple payment options

POS systems provide their customers with multiple payment methods. This makes it easier for the retailers to receive funds sooner and also saves the customer the trouble of signing checks or invoices.

Automates tasks

POS systems are capable of handling a wide range of operations including inventory management and staff scheduling. This frees up your time and allows you to engage in strategic activities such as customer relationship building.

Provides data insights

POS systems collect a plethora of data about your customers and enable you to make informed decisions about your inventory, marketing objectives, and operations.

Increases accuracy

Automation helps reduce errors in recording transactions and collecting payments, thus making the process more efficient and accurate.

Saves time

POS systems allow you to save time on administrative tasks, checkout processes, and other clerical workflows.

What to look for while choosing a POS system?

Always keep your business needs in mind, both current and forecasted, when choosing POS software and hardware. For example, mobile point of sales (mPOS) systems can be much more budget-friendly and easy to use than an on-premises POS system. If you want to allow customers to check out by themselves, have a self-service terminal with touchscreen options.

Keep in mind the market trends and look out for the application features when you choose POS software.

If you plan to purchase or upgrade your POS system, here are some pointers to help you make a good decision:

  • Do a thorough quality check of your system, identify shortcomings, and list out the additional features that you’ll need.
  • While searching for the best POS system, make sure to consider factors such as integration capabilities with existing software, smooth user interface, inventory tools, scalability, and price.
  • Research about the different POS systems available in the market today and check out user reviews via online and offline channels. Enquire with other business owners about the POS systems that they use and take their feedback.
  • Explore various solutions, take demos, and narrow your choices down to the ones that fall in your budget range.

Here are some of the important questions to ask the vendor while choosing the POS system for your organization

  1. Is the POS system able to integrate with my current software?
  2. What payment methods are accepted by the POS system?
  3. What is the total cost of the software?
  4. Will the POS system help with inventory management, discount tracking, and other company requirements?
  5. Are there any hidden fees?

FAQs

Q1. What should a good POS system do?

The leading POS systems not only help complete payment transactions but also offer real-time reports that can be accessed on the go via a mobile app or a website.

Q2. What is a point-of-sale transaction?

Point of sale or POS transactions refer to the location and channel where a buyer pays the seller. It can be offline or online.

Q3. How much does a POS system cost?

A POS system costs between $3,000 and $10,000. However, the final POS pricing is determined by the type of POS hardware, software, and level of customization that you request for.

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