What is a POS system?
As its name suggests, a point of sale (POS) system is the technology that processes the transaction between your business and a customer. Modern POS systems include both POS hardware, like a cash drawer and a credit card reader, and payment processing software. Of course, more complexity hides just below the surface. From the different types of POS systems to the benefits and reporting potential of POS software for small businesses, this guide will give you all the information you need to understand how a good POS system is a critical tool for any small business.
Cash register vs. POS: What's the difference?
When you think about a customer checking out, the first thing that comes to mind is likely a cash register. The difference between that traditional solution and a more modern system is the additional features the latter offers.
With a cash register, a salesperson takes cash, hands out change, and maybe uses a receipt printer. A modern POS system, meanwhile, does that and much more including accepting many types of payments and even helping with your data reporting, loyalty programs, and inventory management. Let's dig into those details.
The key features of modern point of purchase solutions
POS features, of course, change depending on what exact solution and plan you choose. That said, most modern systems have a few important common characteristics, all designed to improve the point of sale transaction for customers and businesses:
- Real-time processing of a wide range of payment methods, from cash to online payments
- Contactless options using mobile payment methods like Apple Pay
- Employee management features, like tracking time in and time out for staff
- Loyalty program management, including setup and management of loyalty points
- Inventory management features, including recording and real-time monitoring of product-specific inventory
- Data reporting options, including live data feeds straight into your customer relationship management (CRM) system
What payment methods can a point of sale system accept?
That starts with debit card and credit card processing options, including Europay, Mastercard, and Visa (EMV) payments through the card's chip. Plus, POS systems can also process gift card payments and Android and Apple Pay mobile alternatives. Finally, brick and mortar stores that also have an ecommerce store can often use their POS system for any online ordering process.
In other words, the calling card of this system is versatility. Chances are that if your customers prefer a specific payment method, you can find a platform that supports it.
The difference between POS and mPOS
So-called mobile POS systems, or mPOS, don't require stationary software and hardware that is bound to one place. Instead, they're attached to mobile devices like smartphones or tablets, requiring just a few hardware attachments to process sales.
Moving to a mobile system comes with a few core advantages:
- Data no longer needs to be stored on a local business server but moves to the cloud for increased security and accessibility.
- The system travels with the user. Need to take your food truck or craft booth on the road? Not a problem.
- The ease of use increases dramatically. Now, all you have to learn is a mobile app, instead of an entirely different and new technology.
- Costs tend to go down significantly, especially at the beginning when all you need is some targeted equipment instead of a bulky new register.
4 core benefits of the best POS systems
Moving to a POS system comes with tangible benefits for business owners looking to improve their daily operations. Here are four of the most important benefits POS systems offer small businesses:
1. Improve your customer experience
When customers can choose from more payment methods, use contactless options, or use pre-filled data, the check-out experience improves drastically and you are less likely to lose a sale. You also improve customer loyalty when the checkout process is easy and fast.
2. Enhance your business operations
- The lower learning curve makes it easier to onboard new staff and reduces friction for anyone using it.
- Employee management features allow you to track work time and efficiency for each employee using it.
- The lower need for different technologies and server space, especially for small businesses, reduces overhead and expensive service contracts.
Each of these items serve to improve your business operations over time.
3. Optimize your sales reportingWhat if the same system you used to check out customers could also tell you exactly how much revenue you're generating compared to your costs? What if you could use it to track your inventory? How about reporting on the types of sales processed, to make better business decisions in the future?
Any POS system generates data. The best POS systems then use that data to create actionable reports, helping you better understand your business without the need for manual spreadsheets, multiple software platforms, or other hassles.
4. Streamline customer communications
Finally, modern systems can tie directly to your CRM, attaching specific purchases to the customer’s record. That, in turn, allows for more personalized customer communications, like sending recommendations and new promotions to customers who've purchased a specific product in the past. You create a better communications flow that both improves the customer experience and the effectiveness of your messaging.
The 3 basic types of POS solutions
1. Retail POS systems
2. Restaurant POS systems
3. Service-based POS systems
The software and hardware that make up POS systems
The typical modern solution is not just a bulky POS terminal. It's a smartphone app, typically available for both Apple and Android devices. The point of sale software then lives on a smartphone or tablet, leveraging its touchscreen as the physical register alongside a number of attachable hardware components:
- A card reader, which may be a standalone Bluetooth device or physically connected to the hardware.
- A barcode scanner, particularly in retail environments.
- A receipt printer, although many solutions also offer the option to email the receipt.
- A cash drawer for POS systems in which cash payments are still common.
Digging deeper into reporting capabilities of POS providers
With the basic functionality of any modern POS platform out of the way, let's talk a little more about a secondary feature that can still prove to be crucial if you want to optimize your business efficiency: reporting.
In most modern systems, every transaction is tracked. With the right analytics and reporting solution in place, that sales data can easily turn into intuitive sales reports.
Looking to understand which of your items are selling out fast? Not a problem. How about tracking the efficiency of your promotions or your loyalty problem? Absolutely. The overall trajectory of sales as you near your end of month goals? Of course.
All that data allows you to understand exactly how your business is performing, which helps you as the business owner project future trends and make smarter decisions in the process. You can even use it to make more informed pricing decisions based on your profit margins and sales data.
The same basic capability also extends to your CRM capabilities. Through your POS system, you can easily track exactly what customers are buying and when. When they select email as their preferred receipt, you gather that customer information. When they buy a specific product, it gets added to their customer record.
Imagine just how beneficial this data can become for your business and your customers alike. Integration with your CRM system allows you to perform exactly what that acronym stands for: managing and improving your customer relationships through more personalized communications over time.
How to use your POS software for inventory management
Finally, don't underestimate the potential of your POS solution when it comes to another core business function. The right POS system can double as an inventory management system, optimized to help you make better ordering, reordering, and pricing decisions.
In retail, inventory management allows you to streamline your reordering process and plan ahead with new wholesale or manufacturer orders to make sure you never run out of key items. With inventory as one of the biggest challenges that small retailers face, an effective system to track your stock levels automatically can make all the difference in business success.
Think about it: a good POS system could mean that you never run sales for items that are out of stock again. You know exactly when and what to order ahead of time. If inventory dwindles, you can adjust your pricing to improve your product margin. Put simply, you can tailor your purchasing strategy specifically to buying trends, avoiding either overspending or underspending in the process.
The same basic concept also applies to hospitality systems. Among other benefits, tracking your food stock levels helps you understand exactly when you need new ingredients for your kitchen. The result, once again, is a more efficient process resulting in less waste.
Ready to find a POS system for your needs?
Heartland is the point of sale, payments, and payroll solution of choice for entrepreneurs that need people-powered technology to sell more, keep customers coming back, and spend less time in the back office. Nearly 1,000,000 entrepreneurs trust Heartland to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of surviving the daily grind