How Does A POS System Work, Anyway?

POS System

A point of sale system is where all aspects of your business come together: inventory, customer relationship management, and of course, overseeing transactions.

The POS System has evolved a great deal over the years. They were once simple cash registers that required employees to enter the price of every product manually—now, they can generate reports, keep track of inventory in real-time, apply customer-specific promotions, and so much more. You’ve undoubtedly heard of the various things they can do, but you still wonder: how do they actually work?

How Does A POS System Work, Anyway?

We don’t need to get into the minute details of the technology, because honestly, POS systems are diverse and flexible. People use them in a myriad of ways that make sense for their unique businesses. There are a few basics, though, here’s an overview of what POS systems are made of and what they do:

POS System: The Hardware Elements

Most POS systems include a few key components: a monitor, a credit card reader, and a cash drawer. The monitor displays your store’s database so that employees can interact with it. Some systems only need a tablet to function because they are cloud-based.

The credit card scanner is self-explanatory, and you should always have a cash drawer for customers who prefer this method of payment (it’s crucial not to shut them out by going card or electronic-only—some people have no choice).

Now, depending on your business, you can opt for a few other pieces of equipment, like a barcode scanner or receipt printer. Many systems enable email or text message receipts, so many choose not to use the latter.

Barcode scanners are useful for businesses that need to scan products quickly so that the system can total the cost and send customers on their way. Establishments that make their products on the spot, however—like beverages—will probably require manual entry, though POS software can create shortcuts.

POS System: The Software Components

Software is where POS systems differ significantly. Some can rely on on-site servers while others are cloud-based. If you opt for the former, then you install the software locally, but this may require professional assistance and regular maintenance. You’ll also need to purchase a software license (or multiple). However, it does not require internet access to work, so it has security benefits and works in the event of an internet outage.

With cloud-based platforms, your provider uses their servers to store data, and you can access it via the internet. Vend’s POS system, for instance, is cloud-based. You’ll most likely pay a monthly fee for this option, which can add up over time, but it updates automatically and requires no maintenance on your part.

POS systems include frontend and backend components. The frontend is what you and your staff members will use as an interface on the tablet or monitor screen. You can access the backend separately, which handles analytics and other behind-the-scenes functions your customers don’t interact with directly.

Together, the frontend and backend create a comprehensive system that provides you with an assortment of tools for managing your business instead of merely sticking to handling transactions.

What Can Different POS Applications Do?

POS systems are wide-ranging. Some are even industry-specific and include features that no one else would find useful, such as table layouts for restaurants that make it easier to track which orders go where. There are a few standard features every sound POS system has, though, such as:

Reporting: Creating sales reports is a tedious yet necessary task. You most likely review your business’s sales history on a monthly or quarterly basis and adjust your strategy according to what the numbers reveal.

Electronic POS systems can generate these reports for you. If you want insight into your business’s performance over the past month, week, or even day, most platforms can compile data that it collects in real-time and present it to you in a digestible format. This way, you are never clueless about how well business is going, and you can act quickly if things go wrong.

Customer relationship management: Instead of offering general promotions and hoping a few customers take advantage of them, POS software can create customized promotions on an individual level. Is there a customer that buys similar things fairly often, but they interact with a different employee every time? That’s fine—your system can remember who they are and apply relevant discounts.

Inventory management: Instead of using an Excel spreadsheet to keep track of how much of every product you have, a POS system can keep track of this data for you. It updates itself in real-time, too, so it subtracts a product from the database whenever a customer purchases it. You and your employees won’t have to keep customers waiting to check the backroom if everything is searchable on a screen!

POS systems are capable of the basic functions that cash registers are, but they are capable of much more and work efficiently. Will you implement POS technology in your business?

*This post contains collaborative content.