Whether you’re looking to improve your marketing, sales, delivery processes, or inventory management, the right POS system can help you reach your goals.
Think of POS systems as retail management systems. They handle checkout and payment, but they also facilitate inventory management, staff scheduling, customer management, reporting, and more.
A POS system will provide powerful insights and help you answer important questions like:
- Should you be open on Saturday evening?
- What are your most profitable items? And the least?
- Who’s your top salesperson?
- Which marketing campaign is working best?
This guide covers everything you need to know about point-of-sale systems.
You’ll learn about the types of POS systems, available features, and we’ll give you our take of the best POS systems. We’ve also created a 4-step framework to help you choose the best POS solution for your business.
What is a POS System?
A POS (point of sale) system is a retail management system that processes orders and payments.
The POS system is a combination of hardware and software that handles the entire checkout process from barcode scanning to payment processing. It may also handle back office management, scheduling, payroll, and reporting.
One of the core features of a POS system is the ability to accept multiple forms of payment. Cash, cards (credit and debit), and mobile payments are all in use now. New methods, like Bitcoin, will come soon.
There are many other features depending on your specific vertical, however most systems rely on similar hardware components.
POS System Hardware Components
The primary functions of retail POS hardware include entering orders, scanning barcodes, taking payments, handling cash, and printing receipts.
The terminal is the hardware interface customers use to make payments.
Some POS systems offer wireless handheld terminals that can improve customer experience and employee efficiency by allowing sales to take place at various locations within your establishment, as opposed to being limited to checkout counters.
2. Input Devices
POS systems rely on familiar input devices such as a keyboard and mouse. These components are hardware attached to the terminal or they may be accessed through software on the display unit.
3. Barcode Scanner
The barcode scanner helps expedite the checkout process by pulling up the product information through barcodes and adding the items to the checkout list.
Barcode scanners connect with the POS system’s inventory management module to update product stock levels automatically as you sell goods.
4. Card Reader
The card reader reads the magnetic strip in credit and debit cards.
The card reader can also scan ID cards so you can track sales from multiple employees on the same device.
5. Display Unit
The display unit is at the core of every POS system. The display unit is the primary interface used to process orders and manage the checkout process.
It can also reconcile cash and view inventory, customer information, and performance data. More on that later.
6. Cash Drawer
Most POS system providers offer a choice between distinct types of cash drawers. Cash drawers feature key locks or removable cash trays for security.
7. Receipt Printer
Most POS systems come with a receipt printer.
Many newer POS systems also offer alternative receipt delivery options via text or email.
8. Display Pole
The display pole provides customers with a running total of items scanned, including prices and other order information.
POS System Software Components
The function of the software is to process payments, manage and track inventory, handle customer management, and report on business activity.
The two primary options for POS software are on-premise (aka “legacy” or “traditional”) and cloud-based (aka “hosted”). Here are the critical differences between the two.
On-Premise POS Software
On-premise POS software is an investment. By investing in an on-premise system it’s likely that you could have lower lifetime costs by avoiding fees for software and maintenance.
As you shop around, focus on open-source software without recurring subscription fees to ensure you get the best ROI.
Also, be sure to keep a backup of your system, preferably off site, in case the software gets corrupted.
- Installed locally on hardware at your location
- You maintain and update the software
- Expect to pay more up front to buy a license and dedicated hardware
Cloud-Based POS Software
Most businesses opt for cloud-based POS software because of the affordability – prices could be as low as $75 per month.
The subscription fee for hosted POS software includes robust data security, ongoing updates and maintenance, third-party integrations, and persistent backups.
- Software runs in the cloud so it is location agnostic and scalable
- Low upfront costs with flexible leases
- IT staff not required for service, maintenance, and updates
Types of POS Systems
The best POS system for your business depends on your niche and what types of products you sell. POS systems now cover all major verticals.
A business specific system will include features, workflows, and reporting to help streamline your operations.
Restaurant POS System
The most important factors when choosing a restaurant POS system are its speed and ease of use. Simple and intuitive user interfaces help expedite orders while minimizing mistakes and ensuring accuracy.
Solid hardware with snappy software gives hosts, waiters, managers, and cooks the instant feedback they need to keep up with the increasingly tight demands of this business. An easy-to-use POS system will also help simplify new hire training and improve staff retention.
A restaurant specific inventory management module is a precious feature. Look for a POS system that offers ingredient-level tracking. Aside from simplifying your daily inventory management, you can use this data to forecast how much you must order for seasonal rushes and events.
Reports will help you compare revenue by shift so you can reward and reward your best employees. You can also see the average spend per cover and party. Marketing integrations will help you understand which of your campaigns is driving the most business.
Retail POS System
POS systems designed for retail compliment your customer experience. Popular retail POS features include:
- Customer-facing display
- Wireless terminals
- Barcode reader
- Quick keys for common items
- Bulk product imports
- Product stock reports
- Loyalty programs and promotions
Selling electronics or luxury goods?
Be sure to look for POS systems that feature serial number tracking. This allows your POS system to track specific products.
Serial number tracking helps with warranty claims and loss prevention. It also reduces the risk of falsified or counterfeit returns.
Mobile POS (mPOS) Solution
If you can sell products and services outside of your retail location (assuming you even have one), you should take advantage of it.
Mobile POS solutions make it possible for you to do business just about anywhere. A mPOS runs on an app on your phone, laptop, or tablet to process payments.
Square popularized mPOS when they launched their ubiquitous white square-shaped credit card reader that fit in the headset jack of smartphones in 2010. Others saw the outstanding potential, and now there are many hardware and software options to choose from. You can process payments using magnetic stripe, chip, and mobile.
Grocery & Convenience Store POS System
The combination of high-volume sales and perishable inventory created the need for grocery POS systems that are especially efficient at inventory management.
Grocery POS systems make it possible to manage daily deliveries from multiple vendors. These POS systems track every item, so you know when your stock will spoil. Knowing this gives you the knowledge you need to decide if you will discount items or refresh your inventory.
Payroll management and employee scheduling are other important areas where a grocery POS system can help save time and money – especially considering the additional regulations that you need to comply with when you’re employing minors. Grocery POS systems will track employee hours worked and notify managers if a minor is close to a violation for missing breaks or working too many hours.
20 POS System Features and Benefits
As you can see, we cannot understate the importance of POS systems. Here are 20 features and benefits of using a point-of-sale system:
POS systems provide you with the essential tools you need to run your business. Specific features vary by provider, but all focus on convenience and streamlining common tasks.
2. Improved Customer Service
Using a POS system can help ensure you have the products your customers are looking for.
You’ll know what to reorder to increase sales and keep everyone happy. Also, seeing what’s not selling can help you free up valuable space to bring in new products your customers will love.
Employees won’t get bogged down keeping track of sales or managing inventory. This will give them more time to spend serving customers.
3. Efficiency Gains
POS software reduces the time customers spend at check out while also improving order accuracy. This reduces the time each customer needs to wait in line and how much staff you need to handle busy periods.
4. Reduced Error Rate
As mentioned, POS software speeds up the transaction process, but it does so while reducing errors. Compared to traditional cash register machines, POS systems reduce and detect input errors. This leads to better confidence and a higher focus on customer service.
Barcode scanning reduces checkout error rates by accurately scanning every product.
Color-coded “hot keys” help employees select the items faster and more efficiently. A lower error rate can help reduce payment related issues with your bookkeeping service.
5. Staff Management
POS systems can manage your staff hours and scheduling. This ongoing tracking keeps everyone focused on daily discipline and higher efficiency.
6. Employee Tracking
POS software can track your store staff and their checkout speeds even when multiple employees are using the same terminal.
You can identify employees who are performing well and the ones that require guidance. This can help to improve your in-store experience.
7. Inventory Management
POS software tracks orders, product sales, and returns. This allows the system to alert you when you’re running low on products.
Some advanced systems will even reorder products for you. POS software will help you improve the overall efficiency of inventory management.
8. CRM (Customer Relationship Management)
If you want to manage ongoing relationships with your customers and grow, it’s essential to have a reliable system that can track their spending behavior.
Most POS systems will allow you to offer exclusive deals and promotions to cater to your customer’s needs.
Building strong relationships leads to better satisfaction and repeat business. For instance, keeping track of their purchase history will help you fine-tune your loyalty programs. Plus, you’ll have an ever-growing database of important info such as birthdays, phone numbers, and email address.
9. Return On Investment
Although they could cost thousands of dollars, POS systems are a technology investment that will help your business realize ROI (often quickly).
Cloud-based POS systems further reduce your startup costs. A POS system will help you increase sales and reduce marketing expenses, making you money.
10. Ease of Use
POS systems reduce the time spent on training your staff. Even the most technologically challenged employees can learn to operate POS terminals.
Simplicity, functionality, and usability are primary goals of POS software interfaces. All this combines to make training easy, quick, and painless.
11. Customer Loyalty Programs
POS systems help you target your best customers for loyalty programs and promotions.
You can entice customers to increase their spending habits by utilizing a reward program which also aids in your retention efforts. Gift cards and coupons can help you reach new customers.
12. Third-Party Integrations
POS systems (especially cloud-based POS systems) can integrate with other software systems. Integrating your POS software with your accounting software reduces errors that come with manual entry and keeps your records up-to-date.
POS software can integrate with email marketing services to send triggered emails when customers are most likely to pay attention. One-click or swipe ensures consistent updating of information across all systems.
13. Task Automation
POS software can automate sales commissions, inventory, and purchase order reports. You can automate other common tasks with custom workflows and menus.
Your POS software can also automate your daily close of financials since all the data lives in the system – and if you’re using a cloud-based POS solution, you can do this remotely.
14. Payment Flexibility
With new payment types popping up all the time, you need a platform that can keep up. Mobile payments are not the future. Your customers are using these options right now. If you don’t get involved, you will miss out.
But a growing digital economy does not mean that everyone has access to a credit card or mobile pay. Be prepared to accept cash. By using a POS system with these payment options, you can increase sales and help more customers.
15. Improved Ergonomics
We all have limited front counter space and it’s good business sense to ensure everything on it is adding the maximum value to every sale. POS systems often have a small footprint.
This means that you can do a lot in a limited space and present a better, less cluttered, and aesthetically pleasing front counter. This also leads to better employee comfort, better ergonomics, with more ease of mind to provide superior customer service.
16. Sales Reporting
POS software offers sales reports and detailed analysis that will help you make better decisions. Not only does this data lead to better processes, but you can also forecast. For instance, you can keep a close eye on seasonal demand.
Quick snapshots will tell you the sales performance of your business. POS software makes it easy to do a dive deep into the cost of items sold, net profit, profit percentage, gross margin.
17. Analytics and KPIs
Real-time analytics, reporting, and notifications help you maintain control and get ahead of issues before they grow into a crisis.
Here’s a brief list of KPIs that POS solutions can track:
- Sell-through rate
- Sales by a retail area
- Average category price
- Conversion rates
- Return rates
- Gross margins
Using the right POS system will have a positive effect on your business. With better control over your operations and the right problem-solving skills, you will always be ready for the next challenge.
18. Streamline Product Returns and Exchanges
Modern POS systems can speed up your product return and exchange process. It’s possible to process returns with or without invoices and to refund to credit cards or offer store credit.
19. Maintain Price Standardization
When managing multiple locations, keeping prices standardized usually gets more complicated the more SKUs you carry.
A networked POS system can ensure that prices at all locations are the same. Just log in and set the new price, then all locations update automatically.
20. Enhanced Mobility
Mobile and wireless terminal POS systems can help you deliver a personalized customer experience.
Customer support representatives can check out customers while they assist them on the sales floor, giving them an opportunity to upsell products and services.
Best POS Systems
There are many high-quality POS solutions on the market today. Here are the best solutions based on our research. We regularly update this list as we receive user reviews and feedback.
Square: Best POS for Small Business
Trusted by over 2 million businesses, Square POS is an ever-improving POS that can track, report, and collect feedback like a pro. Square POS can accept cards, checks, cash, and transfer your funds to your bank account.
Square POS comes with proven hardware and software options that are entirely free. Your system includes a magstripe reader and a point of sale app that allows you to take payments on the go. The entire setup is rather affordable and easy to adopt.
ShopKeep: Best POS for Specialty Vendors
ShopKeep is a simple yet powerful POS solution. Targeted mainly at small businesses, it already serves a lengthy list of popular retailers. With an iPad based POS system, ShopKeep is perfect for small specialty vendors, such as food, gift shops, or toy stores. It even works great for cafeterias and bakeries.
The inventory management function is perfect for small businesses. For instance, you can set reorder points and use an automated reporting function to showcase how much (and from which vendor) to order the low stock item. The ShopKeep analytics suite is beneficial too.
Shopify: Best POS for Omnichannel Retailers
Shopify is a leading eCommerce platform that also offers a reliable POS solution that can integrate with your online Shopify store. Each new order automatically creates a customer profile with their complete contact information and shopping habits.
With authoritative reporting features, you can analyze your store’s performance. You can neatly categorize the items by category, sale, vendor, season, and inventory level. You have access to a very functional and easy-to-use dashboard.
Toast: Best Restaurant POS
Toast POS is a mobile cloud-based solution exclusively designed for foodservice. It is an all-in-one system that can gather massive amounts of data. The built-in CRM is very good, and you can generate insightful sales reports with just a few clicks.
Toast offers many useful features your customers will appreciate, including online ordering and loyalty programs. Payroll and staffing are also built-in to help you manage back of house operations.
Lightspeed: Best POS for Retail
Lightspeed is a solidly built option designed for multiple types of retailers with almost every feature-set available. It is probably the only complete POS system available to every niche in the retail industry. The sheer amount of register functionality is staggering.
One special feature is the ability to set different prices for the same SKU on a store-by-store basis. You can also take your show on the road with the Lightspeed iPad app, which can serve as a temporary storefront at special events.
4-Steps to Choose the Best POS System
Choosing the right POS system could be one of the most important decisions you have to make as a business owner.
Most offer excellent tools and software that can help you do everything you’re looking for. Which is the best POS for your business?
To start, you need to know your core business requirements. A coffee shop will require a distinct set of features compared to a retail outlet. You need to match and compare your requirements with the latest POS solutions.
Price (including monthly fees, payment processing fees, and setup fees) is always an important consideration. That said, if you’re facing a cash crunch and your business is tiny, a simple cash register could be all that you need. But note that you would miss out on valuable functions like employee tracking, inventory management, and reporting.
Our 4-step plan will help you:
- Define your requirements
- Compare POS solutions
- Make the most of a demo or free trial
- Negotiate and pick the best solution
Step 1: Define Your Requirements
This is the most critical step in the framework. First, understand and carefully determine the exact requirements for your business.
You need to understand your operation style, the specific hardware and software requirements, and it would help to anticipate your future needs.
It’s important to know that the POS industry is developing fast, and they add additional features all the time. You need to consider tough questions about exactly what you need.
For instance, what are your requirements based on location, products, business model, and customers. Details such as:
- What is your budget?
- Do you prefer on-premise or cloud-based software?
- How many POS terminals do you need?
- Should the POS software run on tablets or handheld devices?
- Do you need a staff timekeeping software as an add on?
- Do you need loyalty interfaces for your repeat customers?
- Which actionable reports and data insights you need?
- Do you need surveillance and access control?
- Will your POS system need to integrate with your existing software?
- What payment methods do you need to accept?
- Which advanced features are most important?
Step 2: Compare POS Solutions
Based on your specific requirements, compare the POS systems to shortlist the qualified providers. Do a point-by-point comparison see which meets the most of your needs.
While most systems look the same on the surface, some focus on enhanced payment integration, while others offer more informed inventory management.
Remember, comparing these solutions is a critical step. If you don’t pay attention, you might buy something with many shiny features that you were not even looking for.
Also, the cost is an essential factor here. It’s not just the cost of the POS system. You need to do a holistic cost analysis including:
- What does the POS software cost?
- Is there a cost for training your staff?
- Is any of the hardware proprietary?
- Are there fees for shipping, delivery, and setup?
- Do you need to sign a contract?
- What’s the total cost of ownership for the first 18 months?
- Will you use the POS vendor for payment processing?
- Can you afford it?
Step 3: Do a Demo or Free Trial
Now comes the time for free trials and product demos. This is where you see the system in action.
A demo or trial is the only way to know if you can use a POS system on a day-to-day basis.
Test across specific roles and scenarios and see where each shortlisted POS system shines. This is a critical stage, and you have to recognize whether the shortlisted solutions are really up to the mark.
Ask sales reps the right questions, then discuss with your key stakeholders to decide and eliminate options you don’t prefer. With due diligence, you should be able to narrow your focus to one or two vendors.
Most small business owners invest in POS systems without a demo or a free trial. This is a serious mistake.
A demo will take time and effort, but will also save time and money in the long run – especially if it helps you avoid early termination fees.
Step 4: Negotiate and Choose the Best POS Software
Ultimately, cost and payment terms might not be entirely negotiable. If you opt for a long-term contract, there are items that you should push for. These items should be open for discussion:
- Contract length
- Software and hardware warranties
- Support hours and response time
- Warranty coverage
- Delivery and set up charges
- Training for staff and management
Negotiate to get the best deal, then get started.
POS System FAQ’s
How important is customer support?
It is crucial to choose a POS system that offers outstanding customer support. As reliable as POS technology is, at some point, there will be an issue that you cannot solve on your end that will force you to call your provider for help.
Without a quick solution, you could lose customer confidence, thousands of dollars, or much more depending upon the severity of the situation. Make sure they do not leave you stranded during that inevitably tough time.
Get an explicit definition about support hours and response times from your vendor. Let them know that you need prompt support solutions and that you cannot compromise.
What credit card processing options are available?
Your POS software provider could handle payment processing or you can use a third-party service. Whether you find your own solution or work within the bounds of what your POS vendor has to offer, it’s safe to assume you’ll be paying a minimum of 1% on every card transaction (and it shouldn’t be over 3%).
There is no way to avoid the fees entirely, but if you plan, you can find deals. Be sure to shop around for the best possible rate and read up on payment processing solutions.
To learn more, check out our in-depth guide on payment processing solutions.
Do I need to have in-house IT staff?
Setup for modern POS systems is usually fairly straightforward. The setup for tablet-based POS solutions is especially simple.
This means there is no need for dedicated IT staff. Cloud-based POS software operates over the internet and providers perform regular maintenance and software updates for you.
Remember that POS systems are retail management systems.
They will help you win more business and provide better customer service. With increasing options at your disposal, there’s never been a better time to purchase a new POS system.
Buying a POS system will have a positive impact on your bottom line. It will lead to better productivity, improved efficiency, and reduction of errors. Become more organized and future proof your business with a POS system.
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Blake Bobit has been an entrepreneur and business owner for over 25 years. He founded Solution Scout to provide the most helpful answers to questions about business solutions. Blake provides strategic advisory services to businesses in many industries nationwide and is passionate about helping others reach new levels of success.