A Comprehensive Guide to POS Transactions

4 April, 2023
4 min
Bill Sarda, Chief of Staff, Digital Transformation

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6 mins

Table of Content

Key Takeaways
What is a POS Transaction?
How  Does a POS Transaction Work?
What are the Different Types of POS Transactions?
How are POS Transactions Handled in a Business?
FAQs on POS Transactions 

Key Takeaways

  • A POS transaction is recorded when a buyer makes a payment while purchasing goods from a seller.
  • POS reconciliation occurs when businesses match POS system transactions as shown on the company’s bank statement to that in their books.

What is a POS Transaction?

A point of sale transaction is a purchase made by a customer at a physical retail location using a payment card or another form of electronic payment. The transaction is recorded by a POS system that captures the purchase details, including the item(s) purchased, the price, and the payment method.

How  Does a POS Transaction Work?

  • Step 1: A customer shops for goods/products from a seller. 
  • Step 2: The seller scans the goods/products and shares price information with the customer.
  • Step 3: The buyer makes the payment. 
  • Step 4: A POS transaction is recorded.
  • Here is an Example of a POS Transaction

    The best example of a real-life POS transaction would be a supermarket. For instance, while you’re at a retail chain, you pick up a few goods and proceed to the checkout counter. At the checkout counter, the supermarket staff scans your chosen products and creates a receipt or a bill. Then, whenever you pay for those items with cash or a card, a POS transaction occurs.

    Example of a POS Transaction

    What are the Different Types of POS Transactions?

    POS transactions can be classified into three major categories, based on the medium through which the transaction takes place:

    1. Online POS Transactions

    As the name suggests, online POS transactions occur whenever a buyer purchases goods or services online. For instance, a buyer logged into the Amazon app and chose certain jewelry. Once the buyer makes the payment with a card or digital wallet, the POS payment is recorded. However, in online POS transactions, the seller has to wait for the cash as a request will be sent to the card-issuing bank for authorization or to debit the cardholder’s account.

    2. Offline POS Transactions

    Offline point of sales transactions take place when a buyer visits a store physically and purchases a few goods. In this case, the seller gets the cash instantly.

    3. Return of Products

    In some cases, the buyer would like to return the product because of its quality or other possible issues. So, a request for reversal would be sent to the card-issuing bank; the reverse of payment could be partial or complete.

    How are POS Transactions Handled in a Business?

    Now, let us understand how the day-to-day transactions are handled with a POS system and how cash is accurately reconciled from the POS payments.

    A Comprehensive Guide to POS Transactions

    What is POS Reconciliation?

    POS reconciliation is a crucial process wherein businesses match POS system transactions as shown on the company’s bank statement to that in their books. Once the payment is received from the point of sale, the sellers compare the POS data with the sales made per day/month/year to ensure complete accuracy and transparency in the process. In a nutshell, they compare the POS sales data with the cash inflows.

    Importance of Reconciliation for POS Payments

    Every type of POS transaction must have the following elements to ensure reconciliation:

    Sales Purchases Receipts
    Whenever a buyer buys a product, either online or offline, a sale is recorded. The POS system closely monitors the number of products sold, the amount of cash received, the date and time of purchase, the employee handling the sale, and the customer information. It records such information. Whenever a buyer purchases goods and pays for the same, all purchase-related data is aggregated on the POS system. After the buyer has made the payment, a receipt is generated by the seller for the buyer. The receipt includes the amount paid, the number of items purchased, and date and time of purchase.

    Now the question arises, how often should you perform a reconciliation? It’s best to reconcile POS payments daily. Sellers might face roadblocks in manually aggregating POS data daily; that’s why cloud-based POS systems are the future.

    Major processors such as Moneris have enabled cloud POS devices for customers who can walk in and make card transactions. The card information could be saved for future use, and the data automatically flows in daily from the ePOS systems.

    What are the Benefits of POS Reconciliation?

    Point of sale reconciliation can be beneficial to B2B sellers. Here are the key benefits of POS reconciliation:

    • Reduce errors and ensure accurate budgets: Accounting can be a highly error-prone process, especially when dealing with a large number of accounts and processes involving several parties. POS reconciliation is important for B2B sellers, especially when witnessing high growth, as it enables sellers to identify errors in a timely manner and take immediate necessary actions. Frequent POS reconciliation also improves the accuracy of financial information. Thus, it helps ensure accurate vendor budgets and operating expenses, among others.
    • Achieve stability in cash flow and accuracy in balance sheets: Timely point of sale reconciliation offers B2B sellers visibility into expenses during each cycle. This will help businesses make informed decisions to ensure cash flow.
    • Better security and theft identification: It is imperative that businesses detect any anomalies in their transactions, such as unauthorized transactions. POS reconciliations enable businesses to spot unauthorized transactions and take necessary measures.

    FAQs on POS Transactions 

    Can a POS transaction be traced?

    Yes, a POS transaction can be traced through bank statements.

    What is the common POS transaction fee? 

    Point of sale transaction fees may vary based on the type of transaction and the POS system used. Generally, POS fees are charged per transaction. 

    Related Resources

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