How Does A Point Of Sale System Work?

Mar 9, 2020 | Weekly Articles

Chances are, if you’re starting a business in retail or restaurant, people in the industry will tell you to purchase a point of sale system.

If you’re new to the business, a “point of sale” or POS system is a piece of technology in which hardware and software components are used to take payments from customers. There’s more to the process than any individual machine, though. A POS system includes the entire network of systems that come together to manage the transaction process for a business.

Point of sale systems can vary in function and look depending on how a business chooses to operate. There are different technologies, payment methods, bookkeeping, inventory, and sales systems available to create an effective and efficient POS system. If you’re looking to understand the different types of point of sale systems are available, let us take you through the most common ones and how they work.

The basics of a POS system

A point of sale system’s purpose is to automate the process by which consumers purchase items. The system utilizes multiple hardware and software components to facilitate a financial transaction. This functionality that point of sale systems provide applies to both physical and online storefronts, but the following example will only apply to physical storefronts.

In general, a customer takes the goods they want to buy to the register. The cashier scans the products to read their price and description. The POS system creates a sub-total, accounts for any discounts and taxes, and works out the full total.

A properly equipped point of sale system will send information concerning the transaction details to an inventory management system, and some will even send product information to sales and marketing teams; so businesses know which items are more profitable than others. If your inventory is low, an automated system can proceed to request additional stock, all without involving manual review.

The customer then pays for their goods. If they pay by card, information is sent to your bank to approve the transaction and send the money to your account. The customer is then given a receipt.

As you can see, there are several important steps a point of sale system does for a business. In seconds it can process a payment, update inventory, and send data to store managers so they know when a product is running low.

Point of sale software

To make all of the above possible, a point of sale system is made up of two parts. Hardware, and software. Starting with software, most systems you buy will come with software already installed. These will also be updated by the POS company every few years, making sure the system still works as good if not better than when you first purchased it.

Deciding what POS software is right for you will depend on your business’ particular needs. This will require some research into your industry, but the core features should have the ability to process purchases, apply discounts and taxes appropriately, and send information to accounting and database software. Additional features can also be included in order to introduce further functionality and versatility within a POS system.

Other features of POS software may allow it to handle returns and exchanges, gift cards, layaway programs, and loyalty programs. If a customer returns an item purchased with a credit card, for example, the cashier can enter the information on the receipt into their terminal. The system takes the information and adds the product back to the inventory and refunds the customer’s account for the amount paid via credit card. Simultaneously, it can also notify staff there’s an item to be picked up and, if necessary, restocked.

It then prints out a new store tag for that item so it can then be put back on the shelf. An employee working in the inventory department will oftentimes come and collect the item, attach the new tag, and return it to the shelves – thereby rendering it ready for sale almost immediately after it is returned.

This is just a singular example of how POS systems can automate and facilitate the purchasing process. But there are countless features available through different point of sale systems software, so find one that is highly recommended in your industry.

Point of sale hardware

Once you’ve chosen the right software solution, it’s now time to consider the physical equipment you will be using. One of the downsides associated with using a POS system is that not all software components are compatible with all hardware or equipment components. This means that to complete the task at hand efficiently and accurately, it must be your responsibility to find the right software/hardware combination for your business’ needs.

In general, POS hardware consists of a cash drawer, a computer screen, a receipt printer, and a communications device that connects to banks and other parts of the business using the internet or phone lines. More advanced hardware solutions also include credit/debit card readers, a display that shows customers information about the transaction, a screen where they can sign for purchases, and a PIN pad where they can enter the PIN code for their card.

There are many different kinds of POS hardware available, including different hardware versions for different kinds of business establishments. For example, a restaurant could have a system that connects to the kitchen to make it easier for chefs to keep up with their order queue. On the other hand, a business resembling a retail store may include a barcode reader or an integrated payment terminal. A hotel could even have a POS system that tracks and notifies hotel employees of room vacancies.

The way your POS hardware is designed will vary based on what industry it was built for. For instance, a point of sale system created for a bar or restaurant will usually have hardware and terminals that are waterproof or resistant to heat. Likewise, for a small retail environment, a compact system that takes up little counter space would be common. With the proper software/hardware combination, your possibilities are both endless and infinitely customizable to your specific needs.

Final thoughts

A point of sale system (or POS) is the system that businesses use to process transactions. The rise of e-commerce has created a number of digital POS services, but they all follow the same basic principle; customers bring their goods to a cashier/checkout system, the POS system processes everything and ensures the right departments get the right information, then the customer leaves with their goods (or waits for them to be delivered in the case of online sales). There are different systems for different businesses, so be sure to choose the right one for you.

Do you need help with choosing or have any questions concerning the right point of sale system for your particular needs? Contact us for a free consultation on what type of point of system is right for your business.

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