Whether you run a big or small business, knowing what is a POS system is essential for making quick sales. POS is an abbreviation for point-of-sale, and it is the terminal point of a transaction between a merchant and a customer.
Essentially, a POS system evolves from the usual cash registers where hardware meets software to create a machine or mobile system for making purchases. Therefore, in this blog post, you will gain more insight into what is a POS system and how it works.
What is a POS system?
A POS (point-of-sale) system is the specific point when a sales transaction is successful. The advent of technology in business is quickly phasing out the manual cash registers to document and track sales. As a result, POS systems facilitate quick transactions for companies and customers. Essentially, the POS market had an increased share of $75 billion in 2020, according to Grand View Research. Similarly, there is a projection that the market for POS systems will experience a 6.9% growth rate between 2021 and 2028.
Types of POS systems?
Several types of point-of-sale systems exist, and merchants make their choices based on their needs and the nature of their business. While several merchants opt for a POS system for its ease with taking and managing inventory, others prefer it for its undependability on price tags. Regardless of your reasons, here are different types of POS systems to help you run a successful payment system.
Mobile POS system
This type is usually applicable to mobile apps, which are primarily free. Smartphones and tablets work well with the apps to manage customer information, keep sales data, and take inventory. Most mobile POS requires a little upfront subscription, while others are free and include free credit card processing.
Additionally, most mobile point-of-sale systems work with a portable receipt printer. Alternatively, the merchant can email the receipts to their customers directly through the app. The mobile POS is suitable for freelancers, independent contractors, retail outlets, and people who provide on-the-go services.
Terminal POS system
The terminal point-of-sale is the usual over-the-counter type, usually more elaborate with hardware and software compartments. They are perfect for more prominent companies who want an all-in-one payment solution, including barcode scanners, cash drawers, and total availability with cloud backup. Even though they require internet access, they can sometimes be free, only requiring a small payment for processing credit cards. More prominent companies like full-service restaurants, grocery stores, salons, etc., prefer the terminal type of POS.
Online POS system
This point-of-sale system is internet-dependent and perfect for small business owners. The reason is that it requires little or no startup costs and synchronizes with all your mobile devices- an ideal relief for remote work. As a result, you can log in to utilize your POS system from anywhere, anytime, from any device. If your business is online-based, the online POS is the way to go.
The multichannel POS system
This point-of-sale system integrates several sales across many sales platforms like a self-functioning network. The sales integration usually blends the various sales platforms into one. You are less likely to be out of stock due to inventory shortage from any of your sales routes. You can use the multichannel point-of-sale system for running online stores, social media pages, websites, and other physical locations. It is perfect and convenient for online businesses and brick-and-mortar stores that run a complete online presence.
Open-source POS system
This type of point-of-sale requires the elaborate services of a software engineer. As a result, it is often available to big businesses; organizations because of the cost of maintenance. The open-source POS is such that you can customize its interface to suit your specific needs- A perfect choice for an enterprise with specific POS requirements.
How does a POS system work?
Knowing what is a POS system is usually not sufficient to run optimal sales. Essentially you need to understand how the system works and how it differs from the former cash registers to benefit from it. While some people think a POS system works as one structural device, it involves a whole set of steps and components.
Setup and installation
The POS company is responsible for setting up and installing your point-of-sale system (hardware and software). Also, they train you and your staff on how to use it and usually include the cost of installation, setup, and training as a one-time payment. The system will come with a primary server, some terminal stations, a cash drawer, and a receipt printer.
Data Entry
Data entry is usually one tedious aspect of running a business. POS systems function to automate this process and make it less tasking and more organized. That way, you do not have to deal with excessive paperwork. Similarly, you can automate other financial data entry processes by utilizing online paystub generators like paystubsnow to generate 1099 and w-2 forms as you gain income and make expenses. Most POS systems serve as data-saving systems for later use.
Managing inventory
Generally, after data entry, inventory management becomes the next step- classifying business information and records. The POS gives you an automated method of stock-taking as the business progresses. For instance, as customers buy a given product, your POS automatically gives you information for the quantity reduction. This feature benefits retail outlets, primarily. That way, your business never runs out of stock.
Customer marketing
The POS system tracks customer purchases and keeps records of customer details. Therefore, you can use stored customer details to engage in some forms of e-marketing that cause the customer to continue patronizing your business. As a result, the entire process leading to the resultant sales is part of the POS working process.
Reporting
The evidence of every complete business transaction is a final report- usually a document. Essentially, producing reports is a primary feature of every POS system, and a good example is cash receipts. Also, several POS systems come with standard reports like purchase history, available inventory, sales records, transaction receipts, etc. Proper documentation of the information will give you a clear picture of how your business is progressing.
Benefits of using a POS system
If you are unsure how a POS system benefits your business, here are a few highlights.
- It promotes automation in business and increases productivity
- It encourages monitoring inventory in realtime
- POS systems boost the earning capacity of your business through increased sales
- You can control and secure data with POS systems
- You get endless possibilities of payment options for your business.
Final Thought
Keeping track of your finances by tracking sales is essential to the profitability of your business. As a result, good knowledge of what is POS system and how it works will keep you ahead of the game and forestall potential losses due to unorganized financial and sales records.
FAQS: What is a POS system?
What is a POS system?
A POS system or point-of-sale system is the particular point of completion of a financial transaction, where a business makes sales. Usually, the merchant gives a receipt for a successful transaction, which is evidence. Essentially, the POS system keeps track of all business financial transactions.
What are the disadvantages of a POS system?
Because POS systems are digital tools and require an internet connection, the primary disadvantage is their reliance on proper internet connectivity. Additionally, most software programs to run the POS system are expensive, difficult to maintain, and pose security risks to the owners.
How does a POS company make money?
Generally, a POS company makes money by collecting percentages, also known as cuts of every successful transaction the business makes. In addition, credit card transaction fees provide a viable means of making money, mainly when the POS company acts as your processor for the transaction.
