What is a POS System?

Having a robust payment processing system is crucial for the ongoing success of any business manager.

What is a Point of Sale, and Why is it Important for Your Business?

If you’re a business owner, or you’re planning on launching your own store, you might have asked the question, “What is a POS?” before.

The POS, or Point of Sale system, is one of the most important tools in an omnichannel merchant’s arsenal.

The “POS” is critical to ensuring you can collect payments from your customers, track important order details, and manage vital financial reports. But for beginners, it can be difficult to understand what “POS” systems do, and how they work.

Today, we’re going to cover everything you need to know about the Point of Sale system, and why it’s so essential to your growing store.

What is Point of Sale? What does POS Mean?

The term “POS” in the business and retail landscape stands for “Point of Sale”. It’s essentially a combination of hardware and software tools companies use to manage sales transactions.

In the past, POS systems in a store would usually have consisted of a large cash register and a ledger, used to record sales and purchases. Now, the digital revolution has streamlined point of sale technology.

Modern point of sale solutions do a lot of the work of managing transactions automatically for business owners.

They can automatically record sales, and process payments. Many solutions even come with tools for generating reports and business insights.

Primarily, POS solutions are used by brick-and-mortar (physical) stores. However, they’re also commonly leveraged by omnichannel and multichannel business owners.

As businesses continue evolve, POS solutions are becoming more sophisticated and advanced.

How Does a POS System Work?

There are many different types of POS systems in today’s world. Some rely heavily on a large amount of hardware, while others are mainly software based.

In all instances, however, a POS system will ensure any business can manage payments efficiently and easily.

In most situations, a POS transaction works like this:

• Step 1: A customer chooses to purchase a product. If you have a physical store, you’d use a barcode scanner to check the price of the item, then process your customer to the “checkout stage” of the purchase.
• Step 2: The POS calculates the price of items combined with any possible taxes, then updates this information on your inventory management system. This ensures you know how much inventory you have left.
• Step 3: The customer chooses their payment method, such as a debit card, credit card, or gift card. Depending on the type of payment, the customer’s bank must then authorize the transaction to finalize the sale.
• Step 4: The purchase is approved, and the sale is processed, with funds sent from the customer’s bank through your payment processing system to your merchant account. You can then print a receipt, or send one to your customer digitally.

What are the Benefits of a POS System?

For a small business owner accepting in person payments, a POS solution is a crucial requirement. It ensures you can process card payments quickly and securely.

Every time a customer makes a purchase within your store, they’ll be involved in a POS transaction.

However, a point of sale system isn’t just necessary, it also offers distinctive benefits to companies, addressing a range of business needs, such as:

• Simplicity: The right point of sale system streamlines the checkout process, ensuring you can track all of your transactions and payments in one location. The right POS will handle everything from collecting payment data to ensuring you can print receipts.
• Consistency: Even in situations where you might not have access to an internet connection on-premises, a POS will ensure you can continue to process sales. Many solutions come with tools that allow you to manage payments offline.
• Efficiency: The best POS solution will ensure you can run both your on-premise and online store with one simple tool. In some cases, modern POS systems even allow you to connect to your customer relationship management software to personalize interactions.
• Multiple payment options: A good POS will allow you to accept all kinds of card payments and transactions, from contactless mobile payment options like Apple Pay and Google Pay, to points from loyalty programs and gift cards.
• Insights: Your POS will collect information for sales reports, help you track cash flow and customer data, and ensure you have all the information you need to make decisions for rapid growth. You can benefit from more accurate and insightful reports.
• Management tools: Some POS solutions can help you track inventory, order information, employees, and more, all in the same place. This makes running your company a lot simpler. You can even synchronize online and offline sales data.

Some tools even come with add-ons and integrations which help to unify more of the tools you need into one powerful “single pane of glass” solution.

The Components of a POS System: Hardware

As mentioned above, most retail POS system solutions consist of two crucial components: hardware, and software.

Notably, while every business today relies on POS software, not every company needs specific POS hardware.

Some cloud-based POS systems allow you to manage your entire store using an app on a phone or tablet.

If your business does require hardware, some of the most common solutions include:

• Touchscreen device: A mobile, internet-connected device such as a monitor, tablet, or smartphone allows you to sort through the table of contents on your POS software and access all of the features included in your solution.
• Cash register and cash drawer: Cash registers help with calculating and processing a customer transaction. Some come with a connected cash drawer, where you can keep all of the cash you collect from customers at the point of purchase.
• Card reader: A card reader allows customers to pay for products securely using their debit or credit card. It might process contactless payments through solutions like Apple pay, use a chip, or a magnetic stripe (magstripe).
• Receipt printer: Receipt printers simply allow you to produce receipts showing customers exactly how much they paid for a product. These receipts act as proof of purchase if a customer needs to request a return.
• Bar code scanner: Bar code scanners quickly read information about a product’s details so an item can be “rung up” for sale. Bar codes offer information into a product’s price, stock level, and features in some cases.

POS System Components: The Software

In today’s retail landscape, POS software is the most important component of a POS system. It’s essentially a real-time POS command center, where you can access sales reporting tools, customer data, and various other important details.

It also ensures you can access payment processing solutions to route funds to your bank account from customers.

The right POS system will come with a number of features included in the software, such as:

• Reporting tools: Solutions which allow companies to convert payment data into valuable insights. Your reporting system might provide an insight into how much you’re selling and earning, which products contribute to the most sales and provide data for sales tax.
• Inventory management: Inventory management tools help you to track the products you have left in your inventory. In some cases, inventory management tools can even provide notifications to show you when you’re running low on stock.
• Customer relationship management: CRM tools and integrations provide insights into customer experience and allow you to track crucial customer information both online and offline. They can help you personalize your customer engagement strategy.
• Employee management: If you have a team of employees within your retail store, your POS solution can help you to track the schedules of employees, and how well your team members are performing on a broad scale.
• Receipt management: Receipt management tools allow business leaders to process funds, track receipts, and even send receipts digitally to mobile devices and email addresses. They can also help with tracking information for refunds.

Some POS solutions come with extra features specific to your industry. For instance, if you’re using restaurant POS systems, you might have access to tools that allow you to send orders to a kitchen, split payments between customers, and manage tips.

What to Look for in a POS Solution

Now you know the answer to “What is a POS and how does it work?” the next step is figuring out what to look for in your solution.

The right POS system will vary depending on the specific nature of your business.

There are plenty of different styles of tool out there, intended for different purposes.

While there’s no one-size-fits-all solution, some key features to consider include:

• Omnichannel sales tools: In today’s digital world, you may need a POS system that can sync both your online and offline sales. The right solution will allow you to manage online ordering and ecommerce information, alongside in-store transactions.
• Inventory management: A good POS system should make it easy to track all of your inventory information in real-time. This will help to ensure you don’t purchase too much of a specific item, and it can also help to reduce the risk of stock-outs.
• Advanced reporting: Powerful reporting tools are essential for showcasing where your customers are spending the most money. Intuitive reports will make it easier to ensure you’re making the most of your sales and marketing strategies, to increase profit margins.
• Payment processing: A strong POS system will ensure you can process transactions using a range of payment processors and tools. They’ll allow you to accept multiple different payments, calculate sales tax automatically, and serve customers effectively.
• Automation: Many of the best POS systems will help streamline the operations of your retail business, by automating inventory and purchasing reports. They’ll also help to automate the process of sending receipts to customers, and create employee schedules.
• Rewards tools: Many POS solutions come with tools that help to boost customer loyalty, with rewards programs, gift cards, and more. They can even help you send exclusive discounts to specific segments of your target audience.
• Management tools: As mentioned above, the best POS solutions will come with tools for managing both customer relationships and employees. They’ll make it easy to track the components of your customer journey, and make the most of your human resources.
• Simplicity: No matter how advanced the right POS system might be, it should always be straightforward and easy to use. The simpler the technology is, the most convenient it will be to run an effective business.
• Integrations: Many of the top POS systems for your retail business will come with a host of integrations to help streamline your store. They might integrate directly with accounting tools, CRM systems, and even comprehensive sales and marketing apps.

4 Great POS Solutions for Retailers

While the right POS solutions for you will depend on a range of factors, there are some leading systems on the market worth considering. Some of the top options include:

Shopify POS

One of the most popular mobile POS systems for online and offline vendors, Shopify POS makes it easy to sync details from your online store, with your in-store sales.

Shopify POS is great for pop-up stores, and can integrate with a range of credit card reader tools, POS terminal solutions, compatible receipt printers and more. You can even access the software on your iPad.

Square POS

Square is one of the most reliable POS solutions on the market. With Square as your POS provider, you can access dedicated software solutions for every type of business, from cafes to pop-up stores.

Plus, you’ll have access to a range of tools for QR code generation, receipt printing, and inventory and customer management.

Lightspeed POS

Another highly reputable solution for point of sale management, Lightspeed serves companies around the world with an all-in-one solution for payment management.

The solution runs via the cloud, and provides access to comprehensive reporting and analytical tools. It can also support a range of payment processing needs.

Bindo POS

Another well-known solution for cloud-based point of sale management, Bindo allows you to manage your business and take payments in a range of formats.

There are more than 300 features included on the platform, such as invoicing tools, and schedule management solutions.

Plus, Bindo can integrate with a range of different hardware solutions.

MORE: The Role of Mobile POS Systems in Modern Retail

Choosing your POS System

A POS solution is one of the most important tools you’ll have as a retail store owner, or any business leader processing payments in the physical world.

Although finding the right point of sale solution might seem complex at first, there are numerous powerful options to choose from.

The right system will ensure you can not only handle transactions in a range of formats effectively, but also manage your employees and deliver excellent customer service.