How to Use a POS System to Run Your Business

Every independent retail or restaurant business, from corner stores to coffee shops, can benefit from using a point-of-sale (POS) system to manage small business operations. POS systems do much more than log sales, add tax, and process payments. A POS can perform a slew of vital business tasks from tracking sales to managing employees. It also helps you process purchases from a growing number of sales channels, including in-store, digital from websites and social media, delivery, and buy-online-pick-up-in-store (BOPIS).

Today’s POS systems are incredibly user-friendly and come with the tools you need to keep up with customer demand for safe, personalized, speedy service. Let’s take a deeper look at what a POS system can do and how you can apply those functions to your retail or restaurant business.

How to Ring Transactions and Process Payments

Ringing in transactions is easy. Small shops with a streamlined product line can create order screens with images or color-coded buttons for each item. Or you can attach a barcode scanner to your POS terminal and have your team scan each item to add it to the sale.

Here are the basic steps for ringing up transactions using a POS system:

1. Add Items to the Sale

The way you add items to the sale will vary based on your business style.
(Image from Square)

A service business like a salon may only have a few services to list on the POS screen but may need a barcode scanner to sell styling products. A butcher shop will need an integrated scale to weigh meat and print market price labels. A bookstore likely relies almost entirely on barcode scans to build a sale. In almost every retail setting, though, shoppers bring purchases to a central counter where you ring in the sale and accept payment. Though, with mobile POS terminals, you can meet customers at the point-of-purchase (POP) instead.

2. Connect the Sale to a Customer Profile

If the customer is a repeat customer, you can add them to the check, as well. If you run a loyalty program, purchases will count toward the customer’s points tally. You don’t have to attach a customer to complete a sale. It’s tempting to skip this step when you’re busy, and some customers decline to share contact information. That’s fine. But if you can connect the sale to a customer, you’ll gain more insights for your reports and sales forecasts. And your customer will gain more personalized service and easier returns.

Adding a customer to a sale has benefits for your business and your customer.
(Image from Lightspeed)

3. Apply Discounts and Rewards

After adding the items to the sale, you can apply relevant discounts, offer current promotions, or prompt new customers to enroll in your loyalty program. From there, you close the sale by processing a payment.

Your POS stores discounts on a separate screen, and sometimes requires manager approval to apply them.
(Image from Lightspeed)

4. Process Payment

Depending on your business type, you might accept credit and debit cards, gift cards, loyalty points, house accounts, cash, or checks. Most POS systems can be configured to accept any form of payment you want. House accounts or room fees are a little niche, though; if you need to accept these payment types, you should double-check that your POS has these features.

Your POS’s payment screen will feature your most common payment types.
(Image from Lightspeed)

That’s all there is to it! Now that sale will appear in your sales and inventory reports. It will be connected to the customer who made the purchase and the staff member who processed the transaction. This information is all searchable if later you need to process a return, assess your team’s sales performance, or decide which items to reorder.

How to Process Orders

POS systems do more than collect payments at the time of a transaction, of course. You can use them to take orders for products, services, or meals. They can also accept online or phone orders. Online purchases accounted for 11% of total US retail sales in 2019 and doubled to nearly 22% in 2020.

Most modern POS systems either integrate directly with ecommerce tools or include the option to build an online ordering site that automatically sends orders to your POS. Your POS will alert you to online orders as they arrive. These orders sync with your inventory, so you don’t need to worry about selling items you don’t have in stock.

The POS system can process an online order for in-person pick-up, and let you easily alert your customer when their items are ready. (Image from Shopify)

Beyond simply processing payments, the best retail POS software comes equipped with tools like abandoned cart notifications, which help you prompt a decision from fence-sitting customers. More than 69% of shopping carts are abandoned, but studies show that about 10% of customers who receive an abandoned cart notice in an email will go back and make the purchase. When you’re running a small shop that 10% can add up quickly.

How to Manage Inventory

Another strength of POS systems is how easy it makes tracking inventory. You can program the software to track the number of items available and locations (if you have multiple stores) and set low-inventory alerts. If you carry perishable items, you may be able to include expiration dates. You can tie items to a specific vendor so you always know where to reorder from.

You can manage inventory across locations with a POS system.
(Image from Square)

Most POS software includes options for inventory adjustment, such as seen on this Square screen. The POS system will track inventory as items are sold. There are also tools for noting manual inventory counts so you can make adjustments or identify missing items. Many systems allow you to use a barcode scanner or smartphone inventory management app to make manual counts speedier.

Some POS software includes reordering capabilities. You’ll need to have stored the vendor information, but once you do, you can either have the program automatically generate suggested purchase orders or send alerts when your stock falls below a set number.

How to Manage Customers

The best way to increase sales and encourage a loyal following is by knowing your customers. Customer surveys, in fact, have found that personalization encourages them to purchase 47% more than they originally planned. A customer relationship management (CRM)-enabled POS system makes it easy for even the smallest businesses to give shoppers the personalization they crave.

You can use the POS system to collect customer contact information, purchase preferences, and spending history. The information lives in the system, where it can help your sales clerks make recommendations to customers in the shop. You can use it to create segmented customer groups like “frequent shoppers,” “March birthdays,” or “wine lovers.” These customer groups are primed for targeted promotional emails to drive loyalty and help shoppers identify items they will love. A little targeted marketing can go a long way; 80% of shoppers prefer to buy from businesses that personalize experiences.

Many POS systems include targeted marketing tools that allow you to send customized messages to specific customer groups. (Image from Lightspeed)

If this seems like a tool your business won’t use, that’s OK. Most POS brands offer customized marketing promotions as an opt-in or additional feature. Or, if you have a CRM tool that you already use and like (like Mailchimp or Constant Contact) you can likely find a POS that integrates with it.

How to Manage Employees

At their most basic, POS systems prompt you to create user profiles for your staff so they can log in to the system, and any sales they process can be linked to them. This may seem like a small function, but it can help you identify mistakes or suspicious returns or transactions. Most POS systems also use employee logins as a timeclock and track your employees’ hours worked. Depending on your business type, you may also need to track individual commissions or tips and set permissions, so employees only have access to their needed tools.

Employee permissions:

The most robust POS systems include schedule-building tools, while others integrate with flexible third-party scheduling software. In some cases, you can set your POS to prompt you when an employee needs to take a break, or if they are close to hitting overtime.

How to Use Reporting and Forecasting

POS systems generate loads of useful reports, including sales over a given period, sales by item, sell-throughs, and items frequently bought together. Each software has its own built-in reports and customization features, so take some time to explore its offerings.

Some POS systems let you access reports on a smartphone as well as a computer.
(Image from Square)

Most POS systems also let you download raw report data in Excel or CSV format for further number-crunching or use in other programs like inventory management or accounting software. These reports can help you better understand your business, including what items sell, who your best salespeople are, what special events or sales produce the best results, and where you have opportunities to improve.

Some POS systems let you build custom reports, as well, so you can tailor what information you track on a daily basis. In many cases, you can email these reports directly from the POS dashboard at scheduled intervals so you and any managers or business partners can stay on the same page.

How to Use Add-Ons and POS Integrations

Every POS brand offers multiple tiers of service. This ensures that small businesses only pay for what they use. But you always have the option to add functions like an integrated website, more robust marketing tools, gift cards, or custom-branded loyalty apps.

You can further customize and expand your POS system’s functions by adding integrated software. Integrated apps are third-party software tools that communicate directly with your POS software so that you can operate them from the same terminal. Popular integrations are available for employee scheduling, payroll processing, accounting, online ordering, and delivery. These tools are usually so well designed—and so loved by small business owners—that it makes more sense for a POS to build an integration rather than design their own solution.

Popular scheduling integrations include apps with auto scheduling functions.
(Image from Homebase)

Integrations can greatly reduce the time you spend in your back office and help you build more dynamic reports. For example, many POS systems integrate with accounting software like QuickBooks. So you can process a purchase order in your POS’s inventory module, then sync with your accounting software to import those costs to the correct accounting categories.

How to Use End-of-Day Tasks and Reporting

Many shop owners notice the difference a POS makes at the daily close of business. One brewery, in fact, found that using a POS for its end-of-day reporting saved its managers two hours a day. Any POS system you use will come with pre-loaded reports like daily sales and cash tracking. In most cases, you can also track sales by staff member, giving you an accurate view of your team’s performance and helping you identify errors that need correcting.

Cash reports make it a breeze to balance your tills at the end of a shift.
(Image from Square)

You can print a cash report for any active cash drawers at the end of your sales day. These reports make it a breeze to balance your tills and ensure accurate cash drops. They also provide a foundation for spot audits and POS reconciliation. Your system will also give you reports that track your sales by item category, payment type, and time of day. This information is trackable anytime in your POS dashboard, so you can see patterns in sales that help you accurately plan for the future.

How to Use a POS System for Restaurants

A restaurant POS system is slightly different from a retail POS because a restaurant POS has the added function of communicating in real time with your kitchen. So a restaurant POS will have some extra hardware—like impact printers, kitchen display system (KDS) screens, or digital menu boards—that need to be configured. In order to keep the lines of communication running smoothly through service, a restaurant POS will typically also include a router or network hub that allows your hardware to continue communicating via an internal network in the event of an internet outage.

From the user side, however, a restaurant POS operates similarly to a retail POS, especially for counter service restaurants where guests pay before their food is cooked. For full-service restaurants or bars, restaurant POS systems support pre-authorized credit cards for opening bar tabs and print paper receipts and signature slips for guests to pay at the end of their meals. Restaurant POS systems will also include preset buttons to process split payments, which reduces errors when there are multiple credit cards.

Restaurant POS systems easily split checks in multiple ways.
(Image from Lightspeed Restaurant)

But just like a retail POS, your team will ring in orders on a touch screen. You can attach a barcode scanner to ring in ready-to-eat (RTE) and ready-to-drink (RTD) grab-and-go items. Many restaurant POS systems also operate on iPads or Android tablets, which you can configure as terminals, customer-facing displays, self-service kiosks, or KDS screens, depending on your needs.

Since most restaurants have at least some staff—and potentially tips—to deal with, you’ll get the most significant benefit from using whatever integrated employee management tools are available. These can range from basic timekeeping and tip tracking to full-scale smart scheduling and time clock management that rejects early or unexpected employee punches.

A Deeper Look at POS Hardware, Software, and Functions

A complete POS system has both software and hardware components. You might be thinking that a POS system looks like a computerized cash register, but POS technology has grown by leaps and bounds in recent years.

Today, POS hardware includes:

Touch-screen terminals: Depending on your POS provider, your terminals can be iPads or Android tablets. Some POS systems, however, operate on industry
specific touch screens built by brands like Elo.
(Lightspeed's iPad POS; Image from Lightspeed)

Handheld mobile terminals: Many POS companies offer handheld terminals that can process sales away from the cash wrap. This can reduce lines and customer wait times. (Square Terminal; Image from Square)

Card Readers: Some POS use pin-pad readers (like this Moby / 8500) while others build readers into the terminal. (Image from Igenico)

Cash drawers: Cash drawers are a necessary component of any POS system. Brands like Star Micronics work with many POS types. (Image from Star Micronics)

Barcode scanners: Barcode scanners can be attached via USB or Bluetooth, depending on your POS configuration. (Zebra LS2208; Image from Zebra)

Receipt printers: Your POS terminal will communicate with a thermal printer to print customer receipts. (Star Micronics TSP100U; Image from Star Micronics)

Label Printers: Retailers can easily print barcode labels and restaurants
can print sticky order slips by attaching a thermal label printer, as well.
(Star Micronics TSP654IISK; Image from StarMicronics)

Self-Service Kiosks: Several POS systems allow you to use iPads or
other tablets to create self-ordering kiosks for your customers.
(OrderUp by SalesVu; Image from SalesVu)

Customer Facing Displays: Different systems design their own integrated screens, and others rely on iOS and Android tablets.
(Square Register; Image from Square)

Integrated Scales: Even the simplest POS systems nowadays communicate with integrated scales for bulk item sales. (Brecknell 6700 Series; Image from Brecknell)

Digital displays: You can manage digital signs and menu screens directly from your POS dashboard. (Image from Revel Systems)

Kitchen Printers: Hot environments like restaurant kitchens need impact printers and non-smearing ink. (Epson TM-U220; Image from Epson)

Kitchen Display System (KDS): Busy restaurants can outfit their kitchens with touch-screen order displays. (Toast KDS; image from Toast)

How you set up your POS hardware will depend entirely on what tasks you need your system to perform. Whatever POS hardware you choose will communicate through the POS software it operates. In some cases that software might be an app that you download from the Apple App Store or Google Play. In others, your POS hardware may come preloaded with the software system. Like the hardware, POS software for retail and restaurant POS systems is massively customizable.

Basic POS software includes tools for:

• Ringing in sales
• Adding sales tax
• Processing payments
• Logging sales and payment history

However, most modern POS systems also support these additional features, either through built-in software tools or via a software integration. Integrations are third-party software tools that can communicate with your baseline POS software.

Built-in software, add-ons, and integrations enable you to use your POS to:

• Manage multiple sales channels: Online, social media, phone—wherever your customers want to make a purchase, a POS can process the payment.
• Manage employees: Log employee hours, process employee tips, send employee time cards to your payroll processor, and track labor costs in dynamic reports.
• Manage inventory: Receive new inventory, track items as they sell, set low stock alerts, generate purchase orders, and compare physical counts to sales in real time to identify missing items.
• Manage customer relationships: From creating basic customer profiles to designing personalized email campaigns and gathering customer feedback, a POS can help you build positive customer bonds.
• Analyze your store’s performance: A slew of reports can be emailed to your management team or business partners. Or you can simply access reports as needed to generate custom views of your retail metrics.
• Streamline end-of-day tasks: Your POS can help you balance cash drawers, send the credit card batch, log sales, and generate orders for the next day’s business.

Bottom Line

Using a POS to run your shop or cafe helps your business compete, and with 30% of small businesses planning to replace their POS in 2021, now may be the time to make the switch. It also helps you provide customers with the speed of service and personalization they crave. But what you get out of POS software depends on what you put into it. Taking time to learn your software’s capabilities, input all the relevant data, and train your people to use it well will ensure you get the most from your investment. You’ll have a lot of support along the way, though; most POS companies offer videos, online knowledge bases, or one-on-one training to help you grow your business.