What Is A POS? Understanding The Point Of Sale Definition & Choosing What’s Best For Your Business
There’s no doubt that starting up your own small business is a daunting process. Before you can get to the fun part (selling your goods and services), there are a ton of decisions to make. 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. First, we’ll give you a quick point of sale definition. You’ll then find a brief guide to understanding what a point of sale is and how it can aid your business, plus a handful of things you’ll want to look for (and look out for) before you make a decision. So let’s get going!
Table of Contents
- What Is A Point Of Sale?
- How A Point Of Sale System Helps You Run Your Business
- What Does A POS Look Like? Your Guide To POS Components
- What Does A Point Of Sale System Cost?
- 6 Essential Functions Your POS System Should Include
- How To Find The Best POS Software For Your Business
- What Is A Point Of Sale System? It’s The Key To Running Your Business Well
What Is A Point Of Sale?
What is a POS system? The point of sale definition is that it’s what your customer will use in your place of business to pay for your product. Commonly referred to as POS systems, they can be as simple as a cash drawer and card reader or a fully-integrated software solution that allows you to operate your entire business from payment processing to complex back-end management.
How Do POS Systems Work?
Now we’ll briefly get into just how point of sale systems work. In its most basic form, a POS system allows you to process a payment in a convenient and often more efficient manner than just a simple cash drawer. When paired with a cash drawer, payment reader, receipt printer, and other items, POS management becomes an even more powerful tool to help you track your profits, customers, inventory, and much more.
If you’re purchasing a software subscription, you will likely have a standard set of functions included in your POS. Aside from simply tracking payments that come in, including certain payment types, this software can store customer information, keep track of products on hand, run reports, and manage your employees. And that’s just the boring stuff. Modern POS systems often have sleek interfaces that can display your inventory to customers and help them easily browse or even complete the payment process themselves to cut down on errors. In short, they can save a busy small-business owner an incredible amount of time.
How A Point Of Sale System Helps You Run Your Business
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 customer and employee management services as well.
If you are at all on the fence about whether or not your small business needs a point of sale system, consider that, in 2019, the point of sale terminal industry was valued at just under $70 billion. And by 2028? That figure is predicted to more than double. Clearly, there is a need among business owners, and companies are scrambling for ways to meet that demand and serve customers in a way that gives them an advantage over their competition. To be a bit more specific, let’s talk about a few of the ways that a point of sale system can directly benefit your business.
Benefits Of A Point Of Sale System
- Sales Tracking: If you’re just using a cash drawer and printer, even the most organized individual can get bogged down in receipts when trying to do the books. A point of sale system makes that easy, syncing your sales automatically and dividing them in numerous ways to be analyzed.
- Employee Tracking: Similarly, if you have even a few employees, you’ll need some kind of method to track their hours and pay. A POS system can take care of this for you and even help you run numbers on employee performance.
- Stock Control: One of the biggest challenges for small businesses is maintaining inventory. In the restaurant industry, buying the correct amount of ingredients can make or break your store. Point of sale systems can help with this, giving you automatic alerts when items are low and helping diagnose what items are selling better than others.
- Marketing: If you have a very small business, marketing might not be a major part of your strategy, at least not yet. However, point of sale systems can make this simple for you and help drive repeat business with minimal effort on your part. Many systems will track and store customer information and spending data, allowing you to send out email blasts or promotions tailor-made for those individuals.
What Does A POS Look Like? Your Guide To POS Components
There are plenty of things you’ll have to keep in mind when it comes to selecting your POS, such as getting the correct software for your business. What is point of sale software, and how do you know what you need? 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 on the premises of your building; your information is stored 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. 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. In contrast, 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 to balance your till. Plus, tasks such as 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, manages your inventory, tracks customer data, and runs reports, helping keep your business running at peak efficiency.
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 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 be a bit more complicated. 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 a 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 to place an order and choose a payment option.
- Kitchen Display System: For a larger restaurant, a simple kitchen printer 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 device 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.
What Does A Point Of Sale System Cost?
Wouldn’t it be nice if there was just one simple answer to this? Of course, the answer is “it varies.” Hopefully, we can get you a little closer in terms of what to expect. First off, it’s going to be important to establish what you need from your point of sale system. If it’s a bare-bones operation, needing little more than a reader for payments and some essentials, you may be able to get by with free POS software. But if you’re looking for something a bit more robust, the pricing can vary.
You’ll want to quickly establish if you’re in the market for a locally-installed system or a cloud-based system. Cloud-based systems have quickly become the new industry standard for many small businesses in large part because they’re cheaper than legacy systems. A locally-installed system can set you back hundreds if not thousands of dollars upfront for your hardware and installation.
If you’re going with a cloud-based system, there will likely be some hardware costs upfront as well, and most companies will offer tailored bundles with things such as cash drawers, printers, and scanners. As for the software itself, monthly fees can range from around $29 a month to well over $100 a month. But you have to pay attention to what’s included with those prices. Many entry-level subscription costs may charge extra for advanced inventory or reporting, loyalty programs, and access to 24/7 customer service. Just make sure that you’re only paying for what you need and that what you need is included in the package you choose.
6 Essential Functions Your POS System Should Include
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 are 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. For retail establishments, some systems come with the ability to create 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 loyalty programs within their software, which is a huge plus. Sometimes, access to that loyalty program will cost extra or needs an integration through a third-party. 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 own either a smaller business or one that doesn’t plan to rely on analytics much, you may be perfectly happy with a system that has just a handful of basic reports. But if you really want 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; others offer bulked up reporting as an add-on for an additional fee.
- Employee Management: As with reporting and inventory, a quality POS system should 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, such as QuickBooks or Xero, or marketing software, such as Mailchimp. Some go much deeper, giving you the ability to set up eCommerce for your business or online ordering.
How To Find The Best POS Software For Your Business
We’ve covered a lot, but here are a few quick things that might help you as you navigate the process of locking down your point of sale software.
- Prioritize: It’s often good to make a rough list of what you really want and need out of your POS system. First, this can help you narrow things down from a wide list of options. Second, it can help you sketch out a rough idea of what you might expect to pay if, for example, you have extensive inventory needs or know that you will be purchasing certain integrations.
- Take Advantage Of Free Trials Or Demos: Most good POS companies should let you test the product or at least see it in action before you make a purchase. Free trials are often preferable because you can get hands-on experience to see just how easy it is to use and don’t have to deal with a sales pitch in the process.
- See What’s Included: If you’re a fan of simplicity, you may be looking for an all-in-one system, and more and more companies are starting to make this an option. Many POS software options now come with built-in processing, loyalty, app stores, etc., which helps simplify things.
- Double-Check For Contracts Or Hidden Fees: We try to sniff these out for you in our reviews, but it’s always good to do your due diligence. Some companies offer true month-to-month pricing, while others incentivize you to sign up for a year by offering lower monthly rates. Just beware of long-term contracts or entry prices that change dramatically after a short period of time.
What Is A Point Of Sale System? It’s The Key To Running Your Business Well
So what is a POS system? Well, hopefully, you now have a pretty strong understanding of what a point of sale system is and what it can do for your business as well as a better idea of what options exist within the industry. But 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 such as 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!
Here are some additional resources to help you find the best POS system for your business needs: