Point of sale (POS) systems, sometimes called POP systems (point of purchase) are highly sophisticated, computerized components of hardware and software that record the amount, place, and time that a given transaction takes place. In addition, POS systems have the ability to maintain complete inventory records, figure up the amount of change due to a customer, offer a customer numerous ways to pay, and much more. In the retail industry, POS is perhaps the biggest advance in more than a generation, as the systems have taken on dozens of previously monotonous tasks and can perform them instantly and with precision.
Of course, there are pros and cons of POS systems, no matter how well-implemented they are, how solid their security is, and how often they are updated. There are costs associated with the systems, hackers can sometimes break into databases, and there is a very real need for ongoing updates to the software and hardware. However, the vast majority of business owners, whether sole entrepreneurs or CEOs of major corporations, seem to prefer the way that POS systems operate. Otherwise, the method would not be as popular or as widespread as it is.
Just in terms of doing on-the-spot, routine tasks like issuing receipts, making entries in the company ledger to record inventory changes, and giving the customer the right amount of change, POS is a huge leap forward in the way retail business is conducted. Compared with non-POS retail methods that were in universal use several decades ago, this new way of doing business if faster, cheaper, and much more efficient.
For those who are unfamiliar with POS techniques, hardware, software, accounting implications, and other aspects of this modern retail system, it’s essential to know exactly what it is, how it works, and to understand its main components. As well, there’s great value in having an objective view of the advantages and disadvantages that go along with any point of sale arrangement.
What POS Hardware and Software is Most Common?
There are hardware and software components in every POS system. Most business owners opt for cloud-based software due to its easy access and low cost. It’s possible to use a server-based software system but costs are rather high and only make sense for very large companies. Software packages vary a great deal in terms of sophistication and price. Most retailers prefer cloud-based, simple systems that handle the transaction itself and inventory management.
There are multiple pieces of hardware associated with the systems, including things like tablets, printers for receipts, terminals for credit cards, card readers, cash drawers, barcode scanners, stands for tablets, caller ID, display screens that customers can see, scales (for items that must be weighed), digital menu lists, kiosks, dispensers for coins and cash, and various kitchen-based display devices.
What are the Main Components of a Typical POS System?
There are hundreds of vendors and sellers of POS software and hardware, so no two set-ups are exactly alike. Some of the most common components of sophisticated arrangements include the following:
- Recording of all the sales data: Every piece of sales data is recorded and stored, depending on whether a retailer has a cloud-based or server-based arrangement
- Total inventory management: For most retail sellers and service companies, it’s essential to know what goods and services are selling faster than others. POS programs keep track of popular and unpopular items, adjust inventory, and can alert a manager when something is in short supply
- Transaction tasks: Using a barcode scanner, employees can scan an item, record its sale, make change, and print a customer receipt in seconds
- Workforce management: Not only can a point of sale system show which employees are selling which items, it can keep track of hours, total sales, commissions, and other worker parameters
- Diverse reporting capability: Whether you want to print up reports on employee efficiency, product sales trends, the products you should consider discontinuing, or which customers are the most frequent buyers, a POS system can do the job
- Integration with various third-party programs: Even companies that already have high-end accounting or CRM systems in place can integrate POS into the mix. Most of the available POS packages on the market today allow for easy integration with a wide range of popular business software
- Management of detailed customer data: POS makes it easy to collect a long list of customer data types, like time of sale, email address, name, method of payment, products purchased most often, and total purchases made in a given time period
Most business owners would likely point out that a good POS program is the best way to track inventory. Because the software does several things simultaneously, an owner need not rush to make multiple entries in the accounting ledgers. A point of sale systems has the capability to update all inventory levels, for thousands of items, instantaneously. That means you can set re-order levels, critical quantity levels, and other key parameters so the system can warn you when you need more or less of a particular item. Inventory tracking means the POS program also keeps tabs on best-selling and slow-selling items. Those two pieces of data are crucial for creating marketing and sales campaigns and stocking shelves with fast-moving items.
The short version of POS advantages includes the following:
- Speed: Everything is done instantly in a POS system. The second a transaction takes place, inventory is adjusted, the customer’s receipt is printed or delivered electronically, and the accounting books record all the data associated with the sale at that very moment.
- Efficiency: POS programs are highly efficient at performing sales and non-sale related tasks all at once. This means owners get double efficiency with regard to accounting and tax information, sales data, employee efficiency information (who sells how much and who sells what), and financial information.
- Security: Properly implemented, POS systems can deter hackers by encrypting much of the data. There are other sophisticated anti-hacking and anti-manipulation elements to high-end POS programs, which are always available as add-ons to standard retail software packages.
- Low cost: For what it does, POS is a high-value service for business owners. To hire humans that perform all the same functions would cost at least five times the expense as purchasing and updating POS programs.
Some Disadvantages and an Overall Verdict on POS
Like everything else, even the very best POS system can have its flaws. In this case the main ones involve security challenges and the need to keep the software updated at all times. When it comes to keeping data safe, there have already been several high-profile incidents in the corporate world in which POS systems “leaked” out sensitive data to hackers.
Major problems are few, however, and millions of small, medium, and large companies continue to use POS in all their retail transactions. The hardware and software sellers are still working out some of the kinks and security risks, but overall, point of sale operations are inexpensive, safe, and bring extreme efficiency to organizations that