Point of Sale Systems

Point of Sale Systems Explained: What is a POS System


Running brick-and-mortar operations requires managerial, marketing, and administrative skills. You need these skills to optimize store operations and drive growth. This all starts with ensuring there is sufficient inventory and have a system that can handle your transactions, manage your inventory and maintaining your staff members. 

With a solid POS or point-of-sale system, you can streamline all of your store operations. Retailers use POS systems to manage valuable resources and save time. A POS (point-of-sale) system makes it possible for customers to make an instant payments for a product or service directly at the store.

The modern-day point-of-sale systems are advanced and extend beyond traditional credit card processing. In fact, today’s POS systems help restaurants and retailers integrate mobile features, contactless payment options, handle distinct marketing channels and typically incorporate a customer vault or CRM. 

The Need for a POS System in 2023

With the right point-of-sale system, it allows you to cut out manual entries and common reporting issues. Most POS systems’ features and mechanics are similar. Some POS systems have a balanced set of features, while some offer specific features to a target market.

For instance, if you run an apparel store, having a POS system would allow you to perform full-scale integration with your inventory. On the other hand, some POS systems help cafes and restaurants optimize menus and make customer service highly efficient. Using a POS system to centralize different aspects of your business is a new standard. It can act as a hub for customer management, payment processing, inventory management, and sales.

Now, let’s touch on the basics of point-of-sale systems, how they work, and how you can make the right selection.

Mechanics of a Point of Sale (POS) System

What is a point-of-sale system? In layman’s terms, it is a combination of software and hardware. Both elements work in tandem to process payment and sales transactions at the time of purchase. Like a cash register, you can use a POS system to categorize items, create receipts, add taxes, and track sales.

The most common components of POS hardware include a cash drawer, customer display, payment terminal, receipt printer, and barcode scanner. If you want to understand how a point-of-sale system functions, see it through the lens of a PC rather than an old school cash register.

A computer allows you to install the software and customize the hardware you need to support specific applications. A point-of-sale system works similarly. And like a computer, a POS system can perform business tasks like managing vendors, payroll costs, and tracking inventory.

Types of POS Systems

There is more than one types of POS system. Depending on your company and industry, choose the POS system that caters to your business needs.

Cloud-based POS Systems

In a cloud POS system, businesses install POS software on specific POS hardware. It is an effective way to store servers in a remote spot that works as a cloud. Cloud option helps businesses save a lot of money and makes data management and access simple. Instead of covering the significant upfront costs of traditional POS systems, cloud-based point-of-sale systems are cost-effective and require monthly subscriptions.

Traditional POS Systems

With a traditional POS system, you store data and software on a local server.  To implement a legacy POS system, you need to cover upfront costs for specific software and hardware. And if the software company rolls out new updates, you’ll need to pay additional charges to reap the benefits of the upgrade.

Mobile-based POS Systems

You can use a single device as an extension of your POS system. You’ve probably seen many businesses using a tablet or a smartphone to tap into the different features of a mobile-based POS system. Mobile POS solutions are suitable for retailers that run small operations and need basic capabilities to centralize data and improve overall customer experience.

Hybrid POS Systems

Businesses that don’t like to depend entirely on either cloud or on-premise POS systems can opt for a hybrid solution. It cuts out your overdependence on cloud and on-site services and creates a balance to run smooth business operations. A hybrid POS system involves using local and cloud services to make POS applications and data more accessible.

Retail and Restaurant POS Systems

Depending on the type, size, and industry of your business, it’s not a good idea to look for a one-size-fits-all POS system. Instead, prioritize your search criteria based on how you run business operations, your business needs, how you can improve the sales process, and what features can help you stand out in a competitive marketplace.

The fact is that most businesses run operations differently and need a particular POS system to manage their sales process and customer services. Modern POS systems offer the most value and are designed to support different kinds of business operations.

Retail-based POS Systems

Retail POS solutions should be simple and effective on both customer and business ends. Through the retail POS system, you can get the products straight to the checkout and allow customers to cover the cost via credit card, debit card, or cash.

Sales associates use retail POS systems to scan the barcode of products, add items in a specific order, calculate/inform the due amount, and calculate sales tax. Retail POS systems come with advanced and updated inventory management features that support an inventory matrix.

Retailers can use an inventory matrix to consider the colors, styles, models, and sizes of various products. The retail POS system also features CRM integration for retailers to create and execute customized email marketing campaigns. Many POS systems now allow retailers to create and track commission targets for employees to influence them to sell more products or services.

Restaurant-based POS Systems

Whether it’s a local dive bar, fine-dining restaurant, or casual eatery, having a POS system is essential. But depending on the restaurant type and operations size, it is vital to implement a POS system designed to support your niche in the beverage and food industry.

For instance, the transaction and order process of quick-service bars and restaurants are similar to retail establishments. The main difference is that after order placements, the POS system communicates the data to the prep stations through KDS (kitchen display system) or kitchen printer. And this communication has to be in real-time to ensure accurate and prompt service.

Considerations to Choose the Best POS System

Choose a POS system features that apply to your industry rather than generalize your criteria.

  • Inventory Management

Most POS systems feature inventory management that cuts out manual counting and helps businesses save time and resources. On top of automated inventory management, ensure the POS system can send you alerts when the stock is low. Ideally, the POS system should send you information about making essential purchases on time to ensure you don’t lose your best customers.

  • Employee Management

One of the features you should look for in a POS system is terminals so that employees can time and time out. It also makes it easier for employees to authenticate and confirm their identity. With employees’ time-ins and time-outs, you only need to cover the costs when workers are on the clock. You should also be able to generate employee schedules through a POS system and save time manually making changes.  

  • POS Reporting

Ensure the POS system can render real-time reporting. It should only be a matter of a few clicks to track expenses and spot potential revenue loss. Sales reporting also allow businesses to track their key performance indicators. These KPIs would reflect whether or not your retail store or restaurant is hitting the set business goals and benchmarks.

  • Third-party Integrations

One of your top considerations in choosing a POS system should be whether or not it supports third-party integrations with an accounting program, customer relationship management solution, and online ordering application. When a POS system supports the integration of third-party applications, it allows you to share data across programs automatically. It minimizes data entry errors and helps businesses save time adding information.


Many new businesses don’t have a clear idea about what is a POS system. Retailers are often reluctant to adopt a new technology that can change their business processes. For many enterprises, implementing a new POS system may be overwhelming. But in the digital and tech-driven age, retailers cannot afford to overlook POS systems.

Businesses don’t have to understand every single technical detail about the POS system before implementing it. The key is to focus on the essential components and features of POS systems. Once you realize the benefits of implementing a POS system, it becomes a straightforward decision.

Whether you’re already running a brick-and-mortar business or planning to start one, you’ll need to invest in a robust point-of-sale system. It is the best way to optimize, centralize, and streamline in-house or remote operations.

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