What Is A POS System? Understanding Point Of Sale Software & Why It’s the Linchpin For Your Small Business
If you’re just starting up your small business, it is no doubt a daunting process. Before you can get to the fun part (selling your goods and services), there are a ton of decisions to be made. It’s easy to get ahead of yourself when you’re envisioning your exciting new venture, but some of the choices you have to make early on in the process will play a huge role in your future success. While it might not seem like it, selecting an appropriate point of sale system may be one of the more important decisions you’ll be facing. Fortunately, we’re here to make things easy for you. Below, you’ll find a brief guide to understanding what a point of sale is, how it can aid your business, and a handful of things you’ll want to look for (and look out for) before you make a decision. So let’s get going!
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Table of Contents
What Does “POS” Mean, Anyway? Defining The Point Of Sale System
I suppose this would be a good place to start. Point of sale systems, commonly referred to as POS systems (and yes the acronym is funny and you’re going to have to get used to seeing it a lot in this post) are what your customer will use in your place of business to pay for your product. Some small businesses may just use a cash drawer and/or a card reader to take payments. However, POS systems have come a long way since then. In fact, depending on the system, you can virtually run your entire business through your POS with many features now available that you may not have even known existed. A top-tier point of sale system can do everything from managing your inventory to providing detailed reports and analytics. It can even help you sell online with eCommerce integrations — and many come with built-in card processor services as well.
Types of POS Systems
Understanding POS Software Options
There are plenty of things you’ll have to keep in mind when it comes to selecting your POS. A good place to start is figuring out if you want a cloud-based system or one that is locally-installed. The difference between those types of systems is actually pretty easy. Locally-installed systems connect directly via a server that is on the premises of your building; your information is stored there on a closed, internal network. Cloud-based systems, on the other hand, connect via the cloud through remote servers. Your information is stored in the cloud and can be accessed remotely from anywhere with an internet connection.
Locally-installed systems are typically more expensive as they will likely come with upfront hardware prices and licensing fees. Cloud-based systems can generally be used with a mobile device or tablet and will have monthly software fees. Security is always a concern when talking about storing your data remotely but, particularly in recent years, improvements have been made in that area and more and more companies are providing cloud-based POS solutions. As mentioned above, locally-installed systems can only be accessed at the physical location of the servers whereas, with a cloud-based system, you could theoretically keep an eye on your sales on a beach in Hawaii if you felt the urge.
Before signing up for POS software, you’ll also want to note if it runs on iOS or Android devices, or both. Running on Android is often cheaper while iOS systems come with a variety of dependable hardware options.
The benefits of using a POS instead of a straight cash drawer are many. With a cash drawer, you will need to keep all of your receipts if you want to balance your till and otherwise simple tasks like splitting checks at a restaurant can be a chore. For a monthly software fee, you can find a POS system that syncs up to accounting software, can manage your inventory, track customer data, and run reports, helping keep your business running at peak efficiency.
Understanding POS Hardware Options
No matter the size of your business, you’re going to need some basic equipment to get up and running. If you’re opening a pop-up store or simply operating a tent at a farmer’s market, this might simply mean a cell phone and a card reader that connects to it. If you have a larger operation functioning across multiple locations, your hardware needs will obviously be a bit more complex. Keep in mind, many POS companies may offer convenient hardware packages to get you started, but the following are a few pieces you might need:
- Cash Drawer: We’ve talked about this a bit already, but a cash drawer is simply that, a receptacle to hold your cash and your receipts. When hooked up to a POS system, the software can track exactly how many times a cash drawer is opened to cut down on fraud.
- Receipt Printer: This is a small printer that will print out a slip of paper with the customer’s order for his or her reference. Many POS systems allow you to customize your receipts with your business’s logo or to go paperless by sending a digital receipt or giving the option for no receipt. Along these same lines, if you are running a restaurant, you may also want a printer in your kitchen to give tickets directly to the cooks (sent either from the stationary POS system or a mobile device).
- Card Reader: Unless you’re a cash-only business, you’re going to need a way to take credit card payments. Simple card swipers are affordable and sometimes thrown in for free with the purchase of a POS system. For added security, you’ll want a reader with the ability to process chip cards.
- Barcode Scanner: Typically used in retail stores, barcode scanners are useful not only for purchases but also as a convenient way to look up product information, be it pricing, stock levels, or a detailed description.
- Tablet: Most cloud-based POS systems operate on some form of tablet, often an iPad. Tablets are generally affordable and can be purchased with a stand, allowing you to essentially run your entire business on one small device. POS software will sync with the device, allowing you to take orders, check reports, manage customers, and more all with just a few taps. Many modern POS options also feature a customer display tablet that gives customers autonomy in placing an order and choosing a payment option.
- Kitchen Display System: For a larger restaurant, a simple kitchen printer just might not be enough to properly and efficiently organize a high volume of tickets. In this case, a Kitchen Display System or KDS can be a lifesaver. This is a device that can display tickets, easily showing how long they have been open, along with any special requests that have been made.
- Scale: If you’re operating a business such as a grocery or a butcher shop, you will likely need a scale to price items. Many POS systems sync directly with scales and the weight is automatically entered and calculated.
Restaurant? Retail? Or More Specific?
You’ll also want to make sure you select a POS system that best suits the type of business you’re running. The two most common types of POS systems are those built for retail establishments and others built for restaurants. Some companies boast software that can handle the needs of virtually any industry, but others cater their services directly to specific types of businesses.
Retail-specific POS systems can come with detailed reporting and sales analytics, eCommerce integrations to help you reach more customers online, and loyalty programs to encourage repeat business. But some software apps get even more specific than that. For example, if you’re opening up a salon, you may want to look for a POS system that can handle complex scheduling and one that can manage payments and tipping to multiple individual employees.
Restaurant-specific systems are generally built to handle all sizes of food-service establishments. If you have a large, full-service restaurant, you’ll want simple table mapping and perhaps a Kitchen Display System, making it easy for servers to send orders back to the cooks. But if you’re specifically opening a pizza shop, for example, there are POS systems built just for that with integrations that allow online ordering and delivery tracking. Don’t be afraid to be picky when you’re shopping around! Chances are there’s a company out there that can fit your needs to a tee.
6 Common & Helpful Features In POS Systems
If you’re shopping around for a new POS system, you’ll quickly discover that they are not all created equal. Even systems with similar price points may have very different feature offerings. Here a few features you’ll want to keep an eye out for.
- Inventory Management: A good inventory system can be invaluable to a small business. In restaurants, the ability to track ingredients in real-time and set automatic stock alerts is extremely useful, while, for retail establishments, some systems come with the ability to create your own purchase orders and track inventory across multiple locations. Just be aware that some systems charge extra for access to inventory management or advanced inventory management features.
- Loyalty: Loyalty can be a great way to increase profits for your business by giving customers a reason to frequent your store again. Depending on the program, customers can store up points or earn rewards based on the amount of money they spend. Many POS systems include their own loyalty programs within their software, which is a huge plus. Sometimes, access to that loyalty program will cost extra or will need to be set up through a third-party integration. Along these lines, some systems have their own gift card creation function, giving you the option to make and distribute either physical or electronic gift cards.
- Customer Database: Most good POS systems come with some form of customer management. This gives you the ability to take and store customer information, whether it’s their email address or purchase history. That information can help you build up a database that allows you to set up effective marketing campaigns for your loyal spenders.
- Reporting: Most POS systems will also come with some form of base reporting. If you’re a smaller business or one that doesn’t plan to rely on analytics much, you may be perfectly happy with a system with just a handful of basic reports. But if you’re really wanting to track your efficiency and pinpoint top-selling items or star employees, you’ll want reporting that does a bit more. Some systems come with an extremely generous offering of reports and some offer bulked up reporting as an add-on for an additional fee.
- Employee Management: As with reporting and inventory, a quality POS system should at least offer some form of employee management. This can come in the form of a built-in time clock to keep tabs on hours or the ability to assign permissions for employees, giving them access to only certain parts of the POS.
- Integrations: While nearly all POS systems come with at least some integrations, you’ll want to research or ask for a list of all of the company’s offerings. Many systems will integrate with accounting software like QuickBooks (read our review) or Xero (read our review), or marketing software like MailChimp (read our review) and some go much deeper, giving you the ability to set up eCommerce for your business or online ordering.
How A POS Integration Or Add-On Can Simplify Managing Your Business
Integrations are a huge part of a point of sale system’s feature set. If you end up with a system that skimps in this department, you may find yourself having to find other, separate software apps for things like accounting, inventory, and employee management. This is not only time-consuming, costly, but the programs might not function very well with your POS. Some of the better POS companies will provide an entire array of integrations built-in to the software while others may charge you a small add-on fee to upgrade to a package that, for example, includes loyalty or advanced reporting. Most should provide you with at least the ability to sync with popular software like Quickbooks or popular eCommerce platforms like Shopify. Having these at your disposal can save you countless hours and cut down on errors.
Some of the larger POS companies, like Square and Clover, come with access to their own app stores, giving you the opportunity to browse through scores of unique and niche integrations that you may not have even knew existed. And a growing number of companies now feature an open API so, if you or someone within your company is tech-savvy, he or she can create a custom-made app that syncs with your POS software.
How Do You Choose A POS System?
Hopefully, you now have a grasp on what to expect when shopping for the right POS system for your business. As with anything, you’ll want to do plenty of research — and our website is a great place to start! To review, here are a few questions to ask yourself as you’re shopping around.
- Do I need a cloud-based system or one that is locally installed?
- Does this POS system meet my retail or restaurant needs?
- What is my overall budget for a POS system?
- What are my must-have features?
- What features would be nice to have as a bonus?
- How accessible is this company if I need support?
- Will this POS meet my needs if my business expands?
Prioritize what things you will need from your POS and compare those features to see what system is most cost-effective. Once you’ve narrowed your decision down to just a few systems, contact each company and see if they can offer you a demo or a free trial. There’s no need to settle when it comes to your POS. With so many options, there’s certain to be one that is optimal for your business. There’s one more factor with POS systems to keep in mind as well.
Credit Card Processing With POS Systems
It may seem like just a minor detail or one more box you have to check while setting up your small business, but choosing a functional and affordable credit card processor can have a huge impact on your company’s bottom line. Some POS systems make the decision easy for you by coming with their own in-house processor that you must sign up for in order to use the POS services. This can be a good thing in terms of convenience, but you’ll want to make sure that those processing rates are competitive and don’t come with hidden fees.
Some POS systems offer their own processor but still integrate with others, giving you the option to shop around or keep your existing provider. There are other companies that lock you into one or one of a very limited number of processors, which can be a big detriment. In general, the more payment processing options a POS system provides you, the better.
Take a look at our POS software comparison page to find a vendor that fits your needs.
Do You Actually Need A Point Of Sale System For Your Business?
Hopefully, by now you have a pretty strong understanding of what a point of sale system can do for your business and a better idea of what options exist within the industry. So the big question remains: Do I really need a POS to run my business?
Plenty of businesses still get by with just a simple cash drawer and card reader. However, POS companies have come a long way just within the past decade and are in constant competition with each other for your business. And that’s a good thing for you. Most companies are constantly updating their product and adding features while still keeping costs affordable. Even some of the free POS apps provide basic inventory and a handful of integrations.
With that in mind, it’s certainly worth at least exploring your options. Your POS may be able to take some of the more tedious or time-consuming parts of owning a small business off your hands, dramatically improving your efficiency. A sleek POS can also give your business a modern, professional feel that may impress customers. And while features like loyalty or marketing may not even be on your radar, you may find that implementing the tools that come with your chosen POS can significantly increase sales.
So now comes the fun part. Check out the reviews of our most highly rated POS systems and don’t hesitate to reach out with a question or comment!
We've done in-depth testing of each and confidently recommend them.