What Is A POS System & Why Do You Need One?
Our guide to different types of POS software covers the most common features and how to choose a POS system that gives your small business the tools it needs to succeed.
Point of sale (POS) systems are necessary for every business. But even the best POS systems can be complicated! Before choosing, you need to learn about POS system components, POS features, how to use a POS system, and what a point of sale system can do for your business.
In this article, we’ll talk about different kinds of POS software, discuss types of POS hardware, break down POS costs, and discuss point of sale system benefits.
Table of Contents
- What Is A POS System?
- POS System Definition
- POS System Cost
- What Are The Benefits Of Using A POS System?
- How To Use A POS System
- POS Guide: Which POS Software Features To Look For
- POS Hardware Components
- Tips When Shopping For A POS System
- Next Step To Choosing A POS System: Shop Around
- What Is A POS System: FAQS
What Is A POS System?
A POS system includes hardware and software to take payments. POS systems also perform business management tasks, such as sales tracking and multilocation management.
The best POS systems for small business are cloud-based, with a lightweight hardware setup that may only include an iPad or tablet and a payment reader. Traditional POS systems include a full countertop setup with a customer-facing screen, scanner, and cash drawer.
POS System Definition
A POS, or point of sale system, can be defined as any electronic system a business uses to process payments.
Though POS systems usually consist of a tablet register, payment terminal, cash register, and other components, a POS system can also be just a smartphone with a mobile Bluetooth card reader. As long as you can use it to process credit card payments electronically, it is technically a point of sale system. In fact, the best mobile POS systems can do almost everything a traditional POS used to do, and sometimes more.
With that said, most POS systems include additional features, such as customer management, sales reports, barcode scanning, and more. And many come with additional point of sale hardware, like printers, additional card readers, and registers.
POS System Cost
POS system costs vary widely, but most modern tablet-based POS systems cost about $800 to $1,500 per terminal, plus ongoing monthly POS software costs ranging from about $40 to $200/month.
You also need to consider payment processing costs when choosing a POS, as an increasing number of POS systems require that you use their in-house payment processor. For flat-rate processors, the standard rate is about 2.5-2.6% + $0.10-$0.15.
The best free POS systems include free software and sometimes even free hardware, but these systems tend to have higher payment processing costs.
The following are a few examples of how much some popular POS systems cost:
Square POS Cost
- Hardware Cost: $988 to $1,479 per terminal
- Software Cost: $0/month
- Payment Processing Cost: 2.6% + $0.10
Clover POS Cost
- Hardware Cost: $1,349 to $1,799 per terminal
- Software Cost: $44.95/month for the Register plan
- Payment Processing Cost: 2.3% + $0.10 on the Register plan
Toast POS Cost
- Hardware Cost: $0 on the Pay-As-You-Go plan or $799 on the Standard plan
- Software Cost: $0/month on the Pay-As-You-Go plan or $69/month on the Standard plan
- Payment Processing Cost: 2.99% + $0.15 on the Pay-As-You-Go or 2.49% +$0.15 on the Standard plan
It’s possible to find a POS that doesn’t cost the earth, and there are even some free restaurant POS systems if you know where to look.
What Are The Benefits Of Using A POS System?
Using a modern POS system — instead of an old-fashioned cash register, for example — confers numerous benefits. Today’s point of sale systems are business management platforms that can help you monitor and manage nearly every aspect of your business.
Some benefits of a POS system include the following:
- Accept multiple forms of payment
- Track sales
- Manage employees
- Measure stock levels with a POS inventory system
- Maintain a customer database
- Send marketing messages to customers
- Sell online
- Incentivize repeat visits with a loyalty rewards program or gift card system
- Observe sales trends with POS reports
- Integrate with other business software you use
All of these features/benefits of POS technology together help businesses increase efficiency as well as profitability.
How To Use A POS System
There are three main steps to learning how to use a POS system at your business.
These steps will all go smoother if you choose a POS with high ease of use. So when shopping for a POS, you’ll also want to pay attention to reviews that mention the POS software’s ease of use — having a system that’s easy to train new hires on is especially important if you want to reduce your employee turnover rate.
Step 1: Installation & Guided Walkthrough
Your POS system will come with a guided online walkthrough of how to use the system or live installation and training, provided either remotely or in person.
In most cases, expert installation and training may cost extra. However, depending on your system’s complexity, an online walkthrough will, in many cases, be sufficient.
Step 2: Employee Training
Fortunately, most of today’s POS systems are so intuitively easy to use that your training needs will be minimal. That means just about anyone can learn how to operate a POS system by simply turning on the system and following the prompts on the screen.
An easy-to-use POS makes training new employees quick and easy.
Step 3: Problem-Solving With Customer Service
Ideally, look for a POS system with a dedicated account manager and 24/7 customer service. This way, you’ll always be able to contact someone at the company if you have any issues operating your POS.
POS Guide: Which POS Software Features To Look For
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.
When looking for the best POS system for your business, here are a few functions you’ll want to keep an eye out for:
Most modern POS systems let you accept multiple forms of payment, including cash, swiped credit cards, chip cards, and contactless credit cards, as well as other contactless payment forms, such as contactless NFC payments (e.g., Apple Pay). Many systems will also now accept QR code payments.
The more ways you give customers to pay, the better! And in the time of ongoing COVID, contactless payment acceptance and self-service POS can keep germ exchanges to a minimum.
If you’re just using a cash drawer and printer, even the most organized individual can get bogged down in receipts when doing the books. A point of sale system makes that easy, syncing your sales automatically and dividing them into numerous ways to be analyzed.
If you have even a few employees, you’ll need an employee management 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. Most POS systems have a built-in time clock to keep tabs on employee hours and the ability to assign permissions for employees, giving them access to only certain parts of the POS.
One of the biggest challenges for small businesses is using their POS system for managing inventory. In the restaurant industry, for example, food inventory management can make or break your business.
Point of sale systems can help with this, giving you automatic alerts when items are low and tracking inventory across multiple locations. Some systems also come with the ability to create purchase orders and manage vendors.
During this time of inflation, a tight, well-managed inventory is essential for maintaining good margins.
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 simplify this and help drive repeat business with minimal effort on your part.
Many POS systems will track and store customer information and spending data, allowing you to send out email blasts, create social media campaigns, or tailor special promotions for certain types of customers (most frequent customers, customers that visited once and didn’t return, etc.).
Most businesses need an online presence to sell on the internet. Retail businesses should offer customers the ability to shop online. Restaurants need to have an online ordering system, so customers can place orders on your website (or app) for pickup or delivery.
Most POS systems either provide businesses with a website for selling online, or the system will connect with popular eComm and online ordering websites, such as Shopify and DoorDash. Increasingly, POS systems also offer omnichannel selling capabilities, such as the ability to buy online and pick up in-store.
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 require a third-party integration.
Additionally, POS systems usually have a gift card function, giving you the option to make, distribute, and accept either physical or electronic gift cards or both.
Most good POS systems come with customer management. This allows you to take and store customer information, whether it’s their email address or purchase history. That information can help you build a database that will enable you to set up effective marketing campaigns for your loyal spenders.
Point Of Sale Analytics & Reporting
Virtually all POS systems come equipped with standard POS 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 POS reports.
But if you really want to track your efficiency and pinpoint top-selling items or star employees, you’ll need reporting that does a bit more. Especially during this time of inflation and tight margins, businesses need actionable data that helps them make smart purchasing and scheduling decisions.
Some systems come with advanced POS reports; others offer bulked-up reporting as an add-on for an additional fee.
While nearly all POS systems come with at least some integrations, you’ll want to research or ask for a list of the company’s offerings. Many systems will integrate with accounting software, such as QuickBooks or Xero, or marketing software.
You may find that your needs grow, and integrations help you scale and avoid higher-priced systems in the beginning.
Industry-Specific POS Features
Depending on your industry, you may need industry-specific functions as part of your POS. For example, a service-based business may want to integrate with the best booking and scheduling software or apply subscription billing, while restaurants will likely want menu management and a kitchen display system.
POS Hardware Components
POS software can be fully mobile on your phone with no equipment or include a full countertop setup with a cash register and other components.
Here are some common POS hardware components:
- Tablet (iPad or other)
- Tablet stand/enclosure
- Customer-facing screen
- Cash drawer
- Card reader/credit card terminal
- Barcode scanner
Many systems require you to purchase your POS hardware from the POS vendor, while others let you source your hardware yourself or use components you already have from a previously used system.
Once you have an idea of which POS hardware you need (and can afford), you can start shopping around.
Tips When Shopping For A POS System
Here are some general tips to keep in mind when shopping for a POS system.
- Determine Your Budget: POS systems have a wide range of possible prices. Some systems are free, and others cost several hundred dollars a month. You can get free hardware (usually with a catch, unless it’s a very bare-bones setup) or spend thousands on POS equipment. It all depends on your needs and your budget.
- Prioritize Features: It’s often good to make a rough list of what you want and need from your POS system. It helps to start by narrowing things down from a wide list of options. Look for the best retail POS systems if your business isn’t based in foodservice, for example. Retail POS software is much different from restaurant POS software. And if you run a pizzeria, you’ll be much better off with one of the best POS systems for pizza parlors than with a system meant for retail. Liquor store POS systems are very different from, say, the best POS for golf courses, so choose wisely and do your research.
- Decide On A Processing Model: Many POS systems include payment processing, while others can integrate an outside payment processor (sometimes for an added fee). If you have a merchant account you currently use and want to stay with, you will want to find a POS that integrates with your merchant services provider. For businesses starting from scratch with payment processing, evaluate what processing model the POS system’s integrated processor uses (for example, interchange-plus, tiered pricing, etc.) and consider whether that processing model works well for your business type and sales volume.
- Consider An All-In-One System: If you’re a fan of simplicity, you may be looking for an all-in-one POS system. More and more POS companies are starting to make this an option. The best POS systems for small business come with hardware, software, and built-in payment processing, as well as an app store with additional POS features and software integrations.
- Take Advantage Of Free Trials Or Demos: Most good POS companies should let you test the product or at least see it before you 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.
- 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. You will also want to avoid hardware leases and payment processing contracts with an early termination fee.
Next Step To Choosing A POS System: Shop Around
Now you are familiar with the POS system definition and know what a POS is. You also know how much a POS costs, how to use a POS system, and the benefits of using a POS system. Armed with this knowledge, the next step is to look at the best POS options for your business.