What is POS Software?
Although the acronym “POS” can have many meanings (just consult the Urban Dictionary), in our context, POS stands for Point Of Sale. In essence, the point of sale is the location where a customer carries out a transaction. It is the checkout stand.
You’ll find a POS anywhere transactions take place: boutiques, restaurants, hotels, cafes, grocery stores, strip malls, salons, etc. Thanks to the recent development of mobile commerce, you’ll even see POS software used for transactions that used to be cash-only. Merchants can now use their smart phones to process credit card payments in informal environments (such as craft fairs and food carts).
Points of sale once looked something like this…
But, over the past ten years, points of sale have evolved from clunky cash registers to the elegant and user-friendly tablet technology we see today.
These days, a typical point of sale looks like this…
There are two parts to any modern POS system: the software and the hardware. Software – the virtual brain of your point of sale – lives in your main processing hub (typically a computer terminal or tablet or some sort). The physical components of your POS (the hardware) serve as accessories to that software.
The primary purpose of POS software is, of course, to process transactions and accept payments, but there are a few additional uses of a POS system. They are:
- Track inventory. Some POS software automatically update your stock when a transaction goes through.
- Monitor sales. Keep track of your best-sellers and products that, perhaps, are not moving as well.
- Print receipts or send digital receipts. If you send digital receipts you’ll also be able to gather customers’ email addresses for your email marketing campaigns.
- Integrate with third-party software. This is most easily done with cloud-based software. Integrate your POS system with your email marketing service, analytics engine, and accounting software. Some POS even connect to your online store to synchronize your eCommerce sales with your in-person sales.
How Can A POS System Benefit Your Business?
Generally, the only things required for a traditional point of sale are a cash register, a receipt printer, and a card scanner (or a shoe box and a money clip, if you’re not particular). In fact, you probably already have a point of sale, unless your business is both cash-based and microscopic or you’ve time-travelled from 1867 to set up your Dry Goods store in a modern marketplace.
But do you have a point of sale system? And do you need one?
A POS software system is so much more than just a way to sell merchandise and accept payment. A true POS system will allow you to manage your employees, track and order inventory, keep your books, set up and maintain an online presence, offer loyalty rewards programs, facilitate quick service, process orders, and analyze sales. In short, POS software systems wear many hats with aplomb. Modern points-of-sale can benefit your business by…
- Saving Money: Do your sales, accounting, ordering, and customer engagement from one system, and you’ll save money on monthly subscriptions to other software providers.
- Saving Time: When all your important data and business functions reside in one place, you can get things done quickly and efficiently.
- Reducing Waste and Theft: POS systems provide important insight into employee behavior and inventory status.
- Boosting Customer Engagement: Integrated loyalty rewards and CRM functions allow you to seamlessly collect data, engage your customers, and keep people coming back.
- Helping Your Store/Brand Stay Relevant: The nice thing about POS software systems, especially those of the SaaS variety, is that they are constantly changing, updating, and adapting to the times. As technology expands and increases, your system will increase with it.
Cloud-Based Vs On-Premise POS Systems
POS software is divided into two categories: cloud-based POS (or SaaS for you tech savvy readers) and on-premise POS solutions.
On-premise software is the type that comes on a disk. You download and install the software yourself, and then everything runs on a closed server within your system. The appeal of on-premise software is your ownership and full control of the system. You only pay once for the software and then it’s yours.
Cloud-based software, on the other hand, is more or less leased. You pay a monthly fee for the right to use the software and store your information on your vendor’s servers. While over time you may end up paying more for your software, cloud-based solutions come with a whole host of benefits that, in our opinion, more than make up for the higher cost.
Here at Merchant Maverick, we tend to recommend cloud-based POS solutions, though we won’t go so far as to say cloud-based is the way to go in every situation. In fact, for certain organizations where security is an issue (like governmental agencies), on-premise software is the better choice. But in most cases, with POS systems in particular, cloud-based software is the best choice. Here’s why.
- Customer service and technical support. On-premise POS solutions come with little to no tech support, and the support that is offered is often very costly. However, cloud-based software typically offers customer support for free; sometimes that support is even available 24/7. You’ll have someone to call or email when your system inevitably glitches out.
- Automatic updates and bug fixes. When you pay for cloud-based software, you pay for monthly access to an ever-improving and updating product. You’ll stay current with technological advances, and they will happen automatically.
- Sync with new 3rd party integrations. As new third party software programs are released, you’ll be able to integrate your POS System with those as well.
- User-friendly. Cloud-based software typically takes a user-friendly approach. You can expect colorful buttons and clean organization.
- Information stored elsewhere. When you use a cloud-based system, all your information is stored in your vendor’s servers. This means that if disaster strikes and your place of business burns down, or floods (or someone drops your iPad), your information is safe. It’s being stored in the cloud.
There are a few downsides to using cloud-based technology, of course. One potential disadvantage to cloud-based software is loss of control on the part of the user. Security is in the hands of your vendor’s server. Granted, that security is extremely good (and beyond what most merchants can maintain); if you deal with highly sensitive information, however, that might be a drawback.
Really, the biggest issue with SaaS technology is the web-based aspect. Your POS system relies heavily upon an internet connection. If your internet goes down, you could encounter some serious technical difficulties.
Fortunately, most POS software systems have fail safes for this eventuality. For example, web-based POS software uses HTML5 Caching (aka Offline Caching). This technique processes two copies of your data. It sends one of those copies to your vendor’s servers (where the magic happens) and another copy to your browser’s cache. If and when your internet goes down, your POS system can run on the copy that’s saved to your hard drive, storing all your transactions until you can connect to the server again.
You can read more about dealing with internet downtime and POS software here.
Common POS Systems Features to Look For
Before you begin the search for your ideal POS solution, you should consider which features you’ll need in your new software.
These requirements vary from industry to industry and from merchant to merchant. Restaurant owners, for example, will likely need raw ingredient management tools and time clock tools. Retail owners, on the other hand, might need an eCommerce integration and a loyalty rewards program.
Make sure you consider every aspect you need your POS software to cover. Draft up a list of the qualities you’d like and begin the search accordingly.
Here is a brief list of the most common features you’ll find available with POS software.
- EMV Capability. In October 2015, data security requirements changed to encourage the use of chip and pin transactions. If you experience a security breach because you haven’t transferred to an EMV capable card reader, you can be held liable (read more on the EMV liability shift here). Fortunately, most POS solutions are now EMV compliant.
- Employee Management. Set your employees’ schedules, assign permissions, and allow them to punch in and out of work on your POS system.
- Inventory Management. Inventory management features allow you to monitor stock levels and receive low stock alerts. Restaurants and cafes, in particular, may find Raw Ingredient Tracking helpful (about 50% of the vendors we’ve reviewed have this feature). Inventory management tools should reduce the time you spend counting boxes in your walk-in fridge.
- Offline Mode. Essentially every cloud-based POS software comes with some sort of feature that allows you to continue using the system even while the internet is down. The amount of functionality you can use during downtime, however, varies from POS to POS.
- eCommerce Integration. Many POS solutions have the ability to connect to an eCommerce platform. The ease of connection, however, may vary depending on which eCommerce platform you’re using. (We review eCommerce solutions too, by the way. See our top recommendations.)
- CRM Capabilities. Almost every POS system comes with some way to input customer information, maintain contact with those customers, and monitor customer engagement. Use that information (and an integration with an email marketing system) to better market your products and services.
- Integrated Loyalty Rewards and Coupons. Encourage customers to return to your place of business with discounts and customer rewards. A few POS software vendors offer these features built-in, but most at least allow you to integrate with 3rd-party loyalty software.
- Purchase Order Management. This feature allows customers to submit purchase orders (PO), which are a lot like invoices that a buyer sends to a seller. With PO management, you can process and fulfill those orders and have a nice, clean digital record of all of it.
- Bookkeeping. While you can always integrate your POS with accounting software, it’s nice to have some built-in features.
- Reporting. View your best selling products, your current sales reports, etc. Every POS solution comes with reporting tools in some form or another.
How Much POS Software Will Cost?
The cost of a new POS solution will vary widely, depending on a variety of factors:
- SaaS or On-Premise: On-premise software requires you to make a one-time purchase while SaaS (software as a service) operates on a monthly subscription model. However, the money ‘saved’ by avoiding monthly subscription costs with a one-time purchase is usually offset by the increased expense of updates, customer service, and bug fixes that go with on-premise POS solutions.
- Number of features: The amount of money you shell out for POS software will largely depend on how many features you want and how specifically you want those features tailored to your business. If all you need from a POS system is the ability to accept payments, your costs will be low. But if you want a true POS system to manage many aspects of your business, you will need to be prepared to invest roughly $65-$400/month (not including the costs of hardware or hardware maintenance) or more, in some cases.
- Hardware required: POS hardware can be pretty spendy, so be sure to budget for the equipment you need before determining how much you can spend on software. If you can run your business with an iPad or two, kudos to you. Your hardware expenses will be mere peanuts. Someone who needs multiple terminals, tablets, scanners, kitchen screens, printers etc. is going to be looking at an initial investment of thousands of dollars, however. Fortunately, many POS vendors offer hardware bundles at reduced rates.
- Integration fees: Many POS systems have higher-level functions built-in, but most also offer the ability to integrate with 3rd-party services. In some cases, you may have to pay your POS provider for this privilege, or shell out for a developer to create an integration for you. But even when integrations are available, they can still cost money. If your POS integrates with an external accounting solution (like Quickbooks or Xero), you are still responsible to pay for that accounting software.
- Customer service costs: Many POS companies offer at least some level of free customer support, usually email-based. But if you want premium support – phone access, dedicated reps, help with set-up, etc. – you’re going to have to pay extra, in most cases.
Buying POS Hardware
First things first: what hardware do you need? The answer to that question will largely depend on which vendor is providing your software, the size of business you own, whether it is in the restaurant, retail, or service industry, and how many locations you have. But common POS equipment includes:
- POS Tablets/terminal: (including iPads and Android tablets): This is the device your cashiers will use to check customers out. If you choose a cloud-based software, your tablet/terminal will use internet access to send transactions to the servers that house your information.
- Tablet/Terminal stand: Swivel stands or customer facing stands are popular.
- Card scanners/terminal: There are lots of card readers that attach directly to tablet processors; however, not too many of these are EMV compliant. Alternatively, you could use an external card reader, like Verifone’s PIN pads, to accept chip payments. Bonus: Some external card readers double as receipt printers.
- Cash drawer: Believe it or not, some customers still pay with cash. What an idea! You’ll need to connect your cash drawer to your tablet or terminal. This is typically done wirelessly or through a USB port.
- Receipt printer: Receipt printers are already built-in to some credit card processors and many systems also let you email receipts to customers, cutting out the need for printers entirely. But you may find that you still need to purchase a separate receipt printer, depending on your business needs.
- Kitchen printer: Not everyone will need a kitchen printer, but some restaurants find that they help the expediting process.
- Kitchen screen: Ditto the above.
- Barcode scanner: While restaurants, cafes, and food trucks likely won’t need anything by way of barcode scanners, they are critical for retail environments. Barcode scanners are typically handheld and come with a stand and a USB cord to connect to the main hub.
- Networking equipment: If you’re using a web-based service, you’ll need equipment that allows you to connect to the internet (modem, router, etc.)
- Scale: Not every business will find a scale useful, but if you deal in bulk items or groceries, a scale can be invaluable.
Once you’ve decided what you need, there are several ways you can approach buying it:
- Buy each item new from your POS vendor
- Purchase a bundle from your POS software vendor
- Buy new equipment from external sources
- Buy used equipment
Generally, you’ll get the most for your money if you buy a hardware bundle from your POS system vendor. That’s also the safest route in terms of equipment compatibility. But smaller operations may find it easier (and cheaper) to simply bargain hunt for their own hardware. And many standard SaaS POS systems these days can operate almost entirely on an iPad or Android tablet; this is especially true if you intend to email receipts rather than printing them. For more information about the different ways to purchase POS hardware, check out our Guide To Buying POS Hardware.