Point-of-Sale Systems: Definition, Types & Comparisons

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Point-of-sale systems are more popular than ever due to the rising demand for contactless payments and cashless transactions. In addition to payment processing, POS software can make it easier to track inventory, manage returns and identify sales trends. These tools provide valuable insights on the customer journey, allowing you to better understand your target market. The key is to choose one that's right for your small business.

TL;DR (Too Long; Didn't Read)

A POS system includes the software and hardware needed to enable and record transactions. Modern POS solutions have advanced features for stock and inventory management, customer relationship management, analytics, accounting and more.

What Is a POS System?

The POS system market is expected to hit $29 billion by 2025. Modern POS software programs have advanced capabilities like end-to-end encryption for secure card payments, reporting and inventory management features, cloud storage and more. Some are industry specific and can be customized according to your needs. Most models are compatible with third-party apps such as Xero, Shopify and QuickBooks.

What exactly is a POS system and how does it work? The point of sale is the time and place where a customer pays for the goods or services offered by your business. A POS system includes the hardware and software programs that enable and record a transaction, allowing consumers to complete their purchase. It usually consists of a main server connected to several checkout terminals and other accessories, such as barcode scanners and receipt printers.

Traditional point-of-sale systems were quite limited, storing all the data on physical servers. The only way to make changes to the menu and get sales reports was to be physically present at your place of business. Modern POS systems store data in the cloud so that you can access it anytime from anywhere. Furthermore, business owners have access to a wide range of options, from fixed POS systems to wireless and mobile solutions.

The latest POS software can automatically generate reports, analyze data and manage customer relationships through powerful customer relationship management features. This allows you to track online orders, customer loyalty programs and stock levels at different stores. Modern point-of-sale systems generate data-driven insights that business owners can use to identify sales trends, learn what specific customers like and make smarter advertising decisions.

Key Components of POS Systems

POS systems are commonly associated with payment terminals, the electronic devices used to process card payments. However, POS terminals are only one piece of the puzzle. These tools capture debit and credit card information, transmit this data to the merchant's bank account and record the transaction. Payment terminals are connected to other hardware and software components, which may include:

  • The main server

  • Register screens

  • Barcode scanners

  • Receipt printers (most POS terminals have built-in receipt printers)

  • Cash drawers

Depending on your type of business, you may need specific peripherals for your POS system. A deli, for instance, may connect its point-of-sale system to a food scale. The features of a POS system will also vary from one brand to another. Some models are basic, while others have special features for inventory management, staff management, customer relationship management and more.

POS systems also need to be connected to a touch-screen PC monitor or other device where you register transaction details. Additionally, they require network devices in order to work; these may include routers, modems and so on. It all comes down to your business needs. For example, if all of your customers make card payments, you may not need a cash drawer.

Cash Registers vs. POS Systems

As a small-business owner, you may be tempted to purchase a cash register rather than POS software. Cash registers come with a lower price tag and have been around for decades. Just like a POS system, these machines can accurately keep records and process transactions. Plus, most models are user-friendly and last longer than POS systems.

The truth is that both systems have advantages and drawbacks. Generally, cash registers are a good choice for small businesses with a fixed location and basic needs. Most models cost less than $100, making them ideal for startups. On the negative side, they lack the capabilities of modern POS systems, such as marketing tools, customer relationship management, reporting and sales management.

POS software allows you to manage customer data, receive payments from invoices, track commissions, process online orders and pull advanced reports. They can also track the number of sales per employee and can even manage payroll. Most systems have options for loyalty programs, discounts, gift cards and email marketing. On top of that, they can record unlimited product categories.

With a cash register, you can only print sales totals. POS systems, on the other hand, generate all sorts of reports that can be viewed or printed from mobile devices. Furthermore, you can integrate POS sales with QuickBooks and e-commerce software, manage your inventory on the go and set up individual staff accounts. While most POS systems charge monthly fees, some are free to use as long as you have a compatible device in place.

Types of POS Systems

Choosing the best POS system depends on your business needs. There are mobile POS systems, terminal POS systems and online POS solutions just to name a few. Mobile POS solutions are increasingly popular among mobile vendors, small retail stores, beauty salons and coffee shops. Like traditional POS systems, they work with your cash drawer, barcode readers and other compatible devices.

If you're looking for a low-cost solution, consider switching to online POS systems. All you need is a tablet (like an ipad), laptop or desktop computer. This option is suitable for retail POS systems, consultancy firms and other small businesses.

Supermarkets, private clinics, concert venues and other businesses may benefit from using self-service kiosk POS software. With this option, you can process patient check-ins, event ticket sales or transportation passes without having an employee handle the transaction. Customers may use kiosk POS systems to look up product pricing and availability in retail stores.

Depending on your industry, you may also opt for retail, restaurant or salon POS systems. Restaurant POS solutions, for instance, don't require label printers or barcode scanners. Some feature custom table maps and remote ticket printing capabilities. Salon POS systems have built-in features for online booking, appointment reminders, memberships, calendar management and other industry-specific operations.

The Best Free POS Software

Without a doubt, POS systems are more efficient than a cash register. Their price, though, can be a major turnoff for small-business owners. One way to cut your expenses is to use free or open-source POS software. Some options to consider include:

  • Square (free all-in-one POS with 2.6% + 10 cents fee per transaction)

  • eHopper (free all-in-one POS)

  • UniCenta (free all-in-one POS)

  • Loyverse (free mobile POS)

  • Chromis POS (free open-source POS)

  • Floreant POS (free open-source POS for restaurant businesses)

The primary advantage of open-source systems is that they are constantly updated. Plus, they don't have the ongoing maintenance costs of proprietary POS software. Since they are backed up by developers worldwide, they offer more security than traditional POS systems.

UniCenta, for example, has been around since 2010. It's compatible with all the major operating systems and can be found in most industries, from hospitality and retail to education. On top of that, it's free to use. However, be aware that open-source POS systems may require a learning curve, and they are not as easy to operate as proprietary POS software.

Choosing a POS System

As a small-business owner, it's important to research your options and compare the different types of POS systems that are out there before making a choice. Consider your industry and type of business as well as the number of products in your store. Think about how your staff will process refunds, what payment methods you want to offer and how many customers you have. Do you need a basic system or one with inventory management and marketing capabilities?

The price of POS systems depends largely on their features. Ideally, look for an easy-to-use system that comes with 24/7 support. Consider choosing one that accepts multiple payment options, such as PayPal and Apple Pay, and works with contactless POS terminals. Contactless transactions are fast and secure, leading to shorter waiting lines since customers no longer have to swipe their cards — they can simply use their phones to make contactless payments.

Another aspect to consider is whether you prefer a conventional POS system or cloud-based software. The latter stores your data in the cloud, making it easy to access it on the go. If you're planning to grow your business, choose a POS system that can accommodate your expansion. Make sure the system allows for an unlimited number of registers and outlets.

Focus on Your Business Needs

Think about what you need most in a POS system. After all, it doesn't make sense to pay for extra features that you don't really need or use. If you operate an ice cream truck, you only need a cash box, a credit card reader and a smartphone or tablet. A supermarket, on the other hand, requires several barcode scanners, cash drawers, payment terminals and inventory management software among other things.

Consider the setup cost and compatibility with your existing systems. If your new POS isn't compatible with what you already have, you'll end up spending thousands on new computers, barcode scanners and other devices.

Think about the nature of your business too. If, say, you sell tobacco and alcoholic beverages in your store, look for POS systems with built-in age verification tools. The best POS system for a pub offering meal-delivery services will have delivery tracking capabilities. Consider the following features as well:

  • Inventory tracking and management

  • Sales management for tracking orders, returns and customers' preferences

  • Advanced reporting capabilities

  • Loyalty program integration

  • Built-in analytics

  • Customer relationship management

  • Tax and sales management

  • Employee management

  • Mobile accessibility

  • Barcode support

  • Customizable display

  • Multiplatform compatibility

  • Built-in reward and point system

  • E-commerce capabilities

  • Printed and digital receipts

  • Accepts mobile payments

Popular POS Systems

There's no one-size-fits-all POS solution, but some options are better than others. ShopKeep, for example, handles over 289 million transactions each year and appeals to small businesses, from coffee shops and food trucks to retail stores. It's not the cheapest tablet-based POS system, but it has lots of features, including advanced analytics, staff and inventory management, cloud-based software and 24/7 support. For an extra fee, users can get access to ShopKeep Loyalty, ShopKeep Spotlight, accounting tools and other add-on features.

A more affordable option is Square Point of Sale. This all-in-one POS system is free to use, but you'll pay a commission per transaction. Its key features include real-time reports, QuickBooks integration, customer relationship management, loyalty schemes, instant transfers and email management tools.

Small businesses that sell in a store and online may also opt for Shopify POS, which features an intuitive interface, powerful back-end reporting and sales management capabilities. It also syncs with Shopify e-commerce, making it ideal for those who use this platform to run their online store. Users can choose from three different plans depending on their business needs. As a startup or small business, you can start with the basic plan and upgrade later or pay extra for add-ons like Better Reports, Tally or Sling.

The right POS for your small business will depend on your needs. Compare features for online ordering, accounting software integration, customer support, ease of use, the ability to track inventory, process payments, collect and store customer information, build customer profiles, and whatever other features you may find helpful before making a commitment.

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About the Author

Andra Picincu is a digital marketing consultant with over 10 years of experience. She works closely with small businesses and large organizations alike to help them grow and increase brand awareness. She holds a BA in Marketing and International Business and a BA in Psychology. Over the past decade, she has turned her passion for marketing and writing into a successful business with an international audience. Current and former clients include The HOTH, Bisnode Sverige, Nutracelle, CLICK - The Coffee Lover's Protein Drink, InstaCuppa, Marketgoo, GoHarvey, Internet Brands, and more. In her daily life, Ms. Picincu provides digital marketing consulting and copywriting services. Her goal is to help businesses understand and reach their target audience in new, creative ways.