The point of sale, often referred to as POS, represents a significant time and place for retailers hoping to complete a transaction. The point of sale system bears the responsibility of registering purchased items, calculating a total, maintaining inventory and processing payments. The point of sale process works differently for cash, check and credit card payments, but the POS process ultimately ends up as the final step in a retail purchase transaction.
Though the general term “point of sale” loosely encompasses anything around the physical location where a retail or sales transaction takes place, most modern merchants apply a more technology-oriented definition to the term. According to the computer publication "PC Magazine," “point of sale” refers to “capturing data at the time and place of sale.” Many merchants employ technology devices like computers and credit card terminals to facilitate this process.
When a customer approaches a merchant to complete a transaction, the merchant will likely employ a computer or cash register to collect some basic information. According to Yahoo! Small Business, POS systems either require merchants to manually enter information about the purchased items using a keyboard or use a bar code scanner to automatically register product information. The computer system then retrieves the item price and a basic description from a database, and some systems automatically deduct the item from the retailer’s inventory. When the merchant indicates that she has registered all of the items in the transaction, the POS system calculates a subtotal, applies any applicable taxes and presents a total amount due.
If the customer pays cash, the merchant typically registers the payment amount with the computer, accepts the currency and returns the difference between the tendered amount and the amount due in the form of change. If a customer offers a personal check, the merchant may either accept the check as a substitute for cash and manually deposit it to the merchant’s bank account later or, if so equipped, submit the check to the POS system’s check processing feature. If the point of sale system features check processing, the system will read the customer’s bank routing and account numbers from magnetic ink on the check then submit that information along with the transaction total to the Automated Clearing House network for settlement. According to the financial software company Intuit, the ACH network electronically debits or verifies the customer’s checking account and begins the process of transferring money from the customer’s account to the merchant’s account.
Credit Card Processing
If the customer offers a credit or debit card as payment, the merchant will likely begin the transaction process by swiping the card through a magnetic reader attached to the POS system. According to the merchant account website Info Merchant, the point of sale system then bundles information from the customer’s card with other transaction information, like the amount, and sends it to the appropriate credit card network for processing. The network uses the card number to route the transaction to the customer’s bank, and the bank issues an authorization or decline message for the transaction. The network then returns the response, and the point of sale system displays the corresponding message.