Frequently Asked Questions About POS Systems

What is a POS System or point-of-sale system?

A point-of-sale (POS) system is used to record the products or services a customer intends to purchase, add up the items’ cost, calculate tax, accept payment and generate a receipt. It differs from a cash register in that it has advanced features that make it easier for you to manage sales data, inventory, customers and employees. POS systems have three parts: software, hardware and a credit card processor.

What is point-of-sale software?

Most POS systems are designed for either retail or hospitality businesses, though some vendors offer solutions for both. Additionally, most vendors offer multiple POS plans, with service levels based either on the number of registers you need and how many people will be using the system or on the features that are included.

What is point-of-sale hardware? How many register terminals does each location require?

A typical POS terminal has either a tablet, touchscreen or computer monitor, as well as a cash drawer, credit card reader and receipt printer. A retail POS system may also include a barcode scanner and customer-facing screen. Other peripherals such as scales, kitchen printers and kitchen display systems (KDS) are often available.

The number of registers, or POS terminals, that each location requires depends on the specific needs of your business. A single POS terminal may be enough for small and new businesses, but you may want to add more if your business is busy and you need to reduce wait times.

What credit card processors work with POS systems? If I buy a POS system, does that make me PCI compliant?

The best POS systems integrate with multiple credit card processing services so you can shop around for the best value. However, some vendors offer their own credit card processing service and bundle it with their POS software and hardware.

There are multiple factors in achieving PCI compliance, including the POS system and credit card processing service you use, whether your business stores cardholder data, and whether your network and internet connection are secure. Your credit card processor can help you with PCI compliance; you will likely need to complete an annual PCI self-assessment questionnaire and may also need to submit to system scans.

When does your business need a point-of-sale system?

As soon as you begin selling goods or services in person, your business needs a POS system, no matter how small your operation is. A POS system makes the checkout experience easier and faster for both your cashier and your customer, reducing the time it takes to ring up a sale and decreasing human errors such as miscalculations.

It helps with inventory management, tracking the items you have in stock, and some can even assist with purchase ordering. POS systems with advanced inventory management tools can track sales from both your e-commerce platform and your physical retail store in real time, or across multiple locations.

Real-time reporting gives insight into your ROI, showing which items are your best and worst sellers, so you can reorder popular items and offer promotions on those that are underperforming. It can also help you identify your busy and slow hours, days, and seasons so you can optimize how you staff your business.

A POS system also plays an important role in reducing theft, as it records every transaction, and you can choose whether or not a manager must approve returns and voids. Shift reports and blind cash reconciliation discourage employees from stealing from the cash drawer. Mobile POS systems allow employees to mingle with your customers on the store floor, deterring shoplifting.

Features and Factors to Consider When Choosing a POS System

As you evaluate POS systems, you need to look at the costs, terms and features for each part of the system: software, hardware and payment processing. Here are some things to keep in mind as you decide which POS system is the best fit for your business.

POS SaaS vs. Licenses

As in other software industries, many POS vendors have cloud-based SaaS (software as a service) plans that you subscribe to. These tend to be the most affordable options. This type of plan usually includes customer support and regular updates, so you always have the most up-to-date version of the software. If you choose to purchase a software license instead, you pay a large upfront fee for the license, a monthly fee for maintenance and customer support, and an annual update fee.

POS Software Plans

Month-to-month software subscriptions are the best option, especially when you first begin using a system, because if you decide that the system isn’t a good fit for your business, you can cancel your subscription relatively easily. Some companies charge more for monthly plans or offer a discount if you pay in advance annually. But, before you take the discount, use the software long enough to feel comfortable with it and confident that you’ll continue using it for at least a year so that you won’t be locked in to a system you don’t like.

POS Software Features

There’s a lot of variance in feature sets between systems, and even between the service plans for each system. You want to look at both the front end of the software, which you use to place orders and accept payments, and the back-office features that you use to manage the system. Here, again, cloud-based POS systems are desirable because they allow you to access the software on any device with a browser, so you can perform back-office tasks wherever you are. Some of the features sets you want to look for are inventory, customer and employee management.

Avoid Leasing Equipment

Plan to buy your equipment, even if that means starting with a very basic setup that you add to as you can afford it. This will save you money and frustration. Some vendors offer “free” POS hardware if you sign a contract, or give you the option of leasing or renting POS equipment rather than buying so that you pay less upfront. As attractive as these options are, it’s going to cost you more over the life of the contract or lease – often many times more – than if you buy the POS equipment upfront.

If you decide to lease or accept free equipment, the terms are usually 3-5 years and noncancelable – so even if you sell or close your business and return the equipment, you must continue paying on it until the contract or lease expires. Then, if the contract or lease has an automatic renewal clause (and most do), you have a very short timeframe to cancel – usually 30 days, and usually in writing – before the contract or lease renews for another year (or three, or five).

Unlocked vs. Proprietary Hardware

Choosing a system that uses unlocked POS hardware can save you money because, if you decide to switch systems, you may be able to continue using the unlocked equipment. If you choose a system with proprietary hardware, you’ll have to buy new equipment when you switch systems.

Setup and Installation Costs

Some vendors charge a fee to help you get your POS system up and running, and this ranges from a few hundred to a few thousand dollars, depending on the scope of the work and whether it’s remote or onsite. If you choose a tablet POS system, this is usually an optional service. Installation services may include configuring hardware, migrating data, or setting up your product catalog or menu. Many companies also offer training services, which may be included with an installation package or available as a separate service.

Integration Costs

If you plan to integrate your POS system with other software and services – such as accounting software, CMS platforms, customer loyalty programs and appointment management apps – you’ll want to find out ahead of time if the integration costs extra, and whether it’s a one-time or recurring fee.

Payment Processing Costs

The best POS systems give you a choice of credit card processing companies to work with, and you’ll pay whichever processor you decide to use various fees, such as a percentage of each sale plus a per-transaction fee. In most cases, you’ll also pay a monthly fee, an annual PCI compliance fee and possibly a monthly gateway fee.

Several POS companies have in-house payment processing services and either require you to use it with their POS system or pay an additional monthly fee or an additional percentage of each sale if you choose to use a different processor. No matter which processor you choose to use, you should be able to accept EMV chip cards and NFC payments such as Android Pay and Apple Pay.

What to Expect in 2019

In 2019, more POS companies will offer their own payment processing services. Although this removes the integration hurdle, it may also eliminate some flexibility and your ability to comparison shop for processing rates if the companies don’t continue to give you the option of working with a third-party processor. Currently, some POS companies with in-house processing don’t allow you to work with any outside processors, and some of those that do charge an extra gateway integration or convenience fee – either monthly or per-transaction. Another issue of having a POS system that’s bundled with processing services is that it makes it harder to switch processors if your rates increase, since you may have to switch out your entire POS system instead of just the processing service.

The industry will continue to move to tablet-based systems, as they offer mobility that allows you to make the checkout experience more convenient for your customers. For example, in a retail setting, sales associates can ring up an order and accept payment from anywhere on the store floor, so the customer doesn’t have to spend even a minute waiting in line. Or, in a restaurant, servers can run credit cards right at the table, so the credit card never leaves the customer’s hand.

Merchants will also use tablet POS systems to create self-serve kiosk checkout stations that allow customers to place or ring up their own orders and pay at the kiosk. For customers, POS kiosks are novel and fun, and usually have shorter lines. For merchants, it’s a strategy to manage rising labor costs, as it allows one cashier to monitor customers using multiple self-serve POS kiosks instead of ringing up orders at a single station.

The cashierless POS trend is taken to the extreme in aspirational retail stores like Amazon Go that give us a sneak preview of what the future of retail and the checkout experience might look like. It uses an app on customers’ phones plus in-store cameras, sensors, RFID and AI to detect what customers carry out of the store and then automatically charges their credit cards.