How To Use a POS System to Run Your Business (+ Video Guide)
Meaghan has provided content and guidance for indie retailers as the editor for a number of retail publications and a speaker at trade shows. She is Fit Small Business’s authority on retail and ecommerce.
With more than a decade of hospitality experience, Mary has worked in some of the most celebrated restaurants in the world. Her expertise is featured across Fit Small Business in restaurant, retail, and starting a business content.
This article is part of a larger series on POS Systems.
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, online, social media, delivery, and buy online, pick up in-store (BOPIS).
How To Use a POS Video
Step-by-Step Guide To Using a POS System
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. Modern POS systems have two main components: the POS terminal and the management dashboard. We’ll start by looking at the most common tasks you and your staff perform in the POS terminal.
How To Ring Transactions & Process Payments
Ringing in transactions with a POS 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. We outline the basic steps below:
1. Add Items to the Sale
The way you add items to the sale will vary based on your business style.
(Source: Square for Retail)
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
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.
If the customer is new, you can create a customer profile at the time of purchase. If they are a repeat customer, you can add them to the check from a simple customer search. If you run a loyalty program, purchases will count toward the customer’s points tally.
Tip: Collecting customer data is easier when there’s a direct benefit for shoppers such as enrolling in a loyalty program, receiving digital receipts, or opting into a newsletter.
Adding a customer to a sale has benefits for your business and your customer.
(Source: Square for Retail)
3. Apply Discounts & 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. (Source: Square for Retail)
4. Process Payment
Most POS systems can be configured to accept any form of payment you want. Depending on your business type, you might accept credit and debit cards, gift cards, loyalty points, house accounts, cash, or checks. 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. (Source: Square for Retail)
That’s all there is to it! Now, that sale will appear in your sales and inventory reports. If you use customer tracking and customized employee permissions, 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 you need to process a return, assess your team’s sales performance, or decide which items to reorder later.
If you’re looking for a simple way to process payments, see our guide to processing payments with Square.
How To Use a POS To Process Orders
You can also use a POS system to process orders that arrive via the phone or digital sales channels like your website or social media accounts—which is incredibly useful since online purchases peaked at 19% of total US retail sales in mid-2020. Although that number fell to about 15% for 2021, it is still higher than pre-pandemic levels.
Most modern POS systems either include the option to build an online ordering site that automatically sends orders to your POS or integrate directly with third-party ecommerce tools. With either setup, 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.
Your POS system can process an online order for in-person pickup, and let you easily alert your customer when their items are ready. (Source: Shopify)
When you receive the order alert in your POS terminal, you can prepare the items to be shipped or delivered locally (if you offer these services), or hold the items for the customer to pick up in-store. Typically the payment and shipping details (if there are any) have all been handled by the POS system’s online tools.
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. Around 80% of shopping carts are abandoned, but studies show that about 15% of customers who receive an abandoned cart notice in an email will return and complete the purchase. When you’re running a small shop, that 15% can add up quickly.
The best restaurant POS systems also come with drive-thru management, catering tools, or delivery management modules. This enables you to track the profits and losses of each part of your business separately so you can see where you are making and losing money.
How To Use a POS To Close a Shift
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, cash tracking, end-of-shift, and close-of-day reports. In most cases, you can also track sales by staff members, giving you an accurate view of your team’s performance and helping you identify errors that need correcting or losses that require reporting.
Cash reports make it a breeze to balance your tills at the end of a shift. (Source: Square)
If you use cash tills, you’ll print a cash report for any active cash drawers at the end of your sales day. These reports are found in the POS terminal and make it a breeze to balance your tills and ensure accurate cash drops. They also provide a foundation for spot audits and POS reconciliation.
A POS like TouchBistro makes close-of-day foolproof by providing a checklist view to track your progress. (Source: TouchBistro)
With your cash tills balanced, you’ll make sure all open checks are closed and all your staff are clocked out and then run the close-of-day process from the terminal. A major part of the POS close-of-day process is batching your credit card transactions and sending the information to your payment processor. So, it is important that your close-of-day process only happens once per day.
If you’re using a POS to run a restaurant that operates during multiple parts of the day, you’ll close your cash tills and print staff reports for each shift. But you won’t run the end-of-day reporting until your business is physically closed and will not process any more transactions.
Your POS management dashboard—like this one from Lightspeed Retail—gives you a wealth of information at a glance.
(Source: Lightspeed)
Once your close-of-day is run, you’ll print any additional reports you like from your manager dashboard. Some people also refer to this as your “back-office” dashboard. This term has become a bit of a misnomer in recent years, since most modern POS systems let you log in to your dashboard from any web-enabled device—whether it is in your back office, in your home, or on your phone. 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 POS Hardware
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:
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. Most cloud POS systems are self-installable, but for elaborate installations, you may prefer to use the services of an in-person technician.
Take a deeper look at POS hardware options by reading our guide to POS hardware.
How To Use Additional POS Functions
A POS is much more functional than a cash register. Every POS brand offers multiple tiers of service. This ensures that small businesses only pay for what they use. But where they are available, you typically always have the option to add functions like an integrated website, more robust marketing tools, gift cards, or custom-branded loyalty apps as your business grows.
Beyond the basics of ringing in sales and processing payments, POS systems have optional add-on modules to help you manage every aspect of your business. Most of these additional features will appear in your management dashboard, but depending on the system you choose, some (like shipping) may be accessible from the POS terminal.
These are just the functions that are common now. As the business landscape or consumer preferences change, POS systems update their tools to keep your business up to date. In the sections below, we’ll explore how to use some of the most common POS add-on functions.
How To Manage Inventory
Virtually every available retail POS system includes the ability to track the number of items you have available, their size and color variations, custom SKU numbers, and available locations (if you have multiple stores). Most will also send you low stock alerts so you remember to reorder. If you carry perishable items, you may be able to include expiration dates (though sometimes this feature costs extra or requires an integration). 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. (Source: 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.
Lightspeed Retail POS includes a searchable database of popular vendor catalogs in the POS dashboard. (Source: Lightspeed)
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. You may even be able to download vendor catalogs into your management dashboard and create purchase orders directly from your POS.
Revel POS includes the ability to generate POs directly from the POS terminal. (Source: Revel)
See our top tips for retail inventory management along with expert rankings of the best POS-compatible retail inventory software, restaurant inventory software, and free inventory software.
Managing Customers
The best way to increase sales and encourage a loyal following is by knowing your customers. Research has shown, in fact, that personalization can increase sales from 10% to 15%. A customer relationship management (CRM)-enabled POS system makes it easy for even the smallest businesses to give shoppers the personalization they crave.
This Shopify customer management dashboard shows how easily you can filter customers into groups based on purchase history. (Source: Shopify)
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 or service staff 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; 71% of shoppers expect businesses to offer personalized experiences and 76% are disappointed when they aren’t offered.
Many POS systems include targeted marketing templates that allow you to send professional customized messages to specific customer groups. (Source: Square)
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.
Employee Management
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.
Lightspeed and virtually all POS systems allow you to create custom access levels for different employee types. (Source: Lightspeed)
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, if they are close to hitting overtime, and block early clock-ins (which helps control labor costs).
Toast POS allows you to create grace periods that prevent employees from clocking in too early. (Source: Toast)
Reporting & Forecasting
POS systems automatically generate loads of useful reports, including sales over a given period, sales by item, sell-throughs, and items frequently bought together. You don’t need to enter specific data or keep a log offline; your POS naturally logs sales information and uses this to create templated reports. Most reports are found in your management dashboard, but others—like daily cashier or server sales reports—can be accessed from the POS terminal. 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. (Source: 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.
“Magic Quadrant” reports—like this one from Upserve by Lightspeed—show you at a glance which products drive business and which should fall off your menu. (Source: Upserve by Lightspeed)
Some POS systems let you build custom reports 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.
For a full breakdown on how to interpret POS reports, read our guide on retail data analytics. And to see how to use the data they provide to improve sales and your business’s bottom line with our tips for demand forecasting.
How To Use POS Integrations
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. (Source: 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 a POS 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. 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. Full-service restaurants or bars can use their POS to pre-authorize credit cards for opening bar tabs and print paper receipts and signature slips for guests to pay at the end of their meals. You can also use a restaurant POS system to process split payments, which reduces errors when there are multiple credit cards.
Restaurant POS systems easily split checks in multiple ways. (Source: Lightspeed Restaurant)
Just like with a retail POS, your restaurant team will use a touch-screen terminal to ring in orders. If you sell ready-to-eat (RTE) and ready-to-drink (RTD) grab-and-go items, you’ll use an attached barcode scanner to ring those items. Many restaurant POS systems also operate on iPads or Android tablets, which you can configure as stationary or handheld terminals, customer-facing displays, self-service kiosks, or KDS screens, depending on your needs.
Toast POS includes built-in tools for managing detailed tip pools in its payroll module. (Source: Toast)
Since most restaurants have at least some staff—and potentially tips—to deal with, restaurants will 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, time clock management, and tip pool management.
Popular POS Systems Compared
Monthly Software Fee | In-person processing fees | Industries served | |
|---|---|---|---|
$0–$60+ | 2.6% + 10 cents | Retail, Restaurants, Service Businesses | |
$69–$199+ | Varies by processor | Retail, Restaurants, Golf courses, Hotels | |
$99 | Varies by processor | Retail, Restaurants | |
$0–$165+ | 2.49% + 15 cents | Restaurants |
Bottom Line
Using a POS to run your business saves you time and provides insights into the health of your business. 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 understand how to work a POS system—learning your software’s capabilities, inputting all the relevant data, and training 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 as most POS companies offer videos, online knowledge bases, or one-on-one training to help you grow your business.
