POS payments are any transaction completed using your business’s point of sale system, whether that be via cash, check, credit/debit card, or new payment types like Apple Pay and Google Pay. A POS system is more than a simple credit card machine; it’s all the software, hardware, and services you use to complete payments. For many small businesses, a POS payment is often the easiest way to accept credit cards.
How POS Payments Work
A POS system is the software and hardware combination that allows your company to accept payments for goods and services. Before the digital age, you would recognize a POS system as a simple cash register. But with new technologies like bar code scanners, credit card machines, touch-screen terminals, receipt printers, and mobile payment apps, a POS system looks slightly different for every business.
Credit Card Machines & POS
A credit card machine is one element of the larger POS system. If you’re running a brick-and-mortar retail store, your POS system will likely still involve a cash drawer. However, it will be augmented with payment terminals to allow you to take payments via credit/debit card, and digital forms of payment like Apple Pay and Google Pay. These come in the form of credit card machines. It’s best to connect your payment processing to your POS for an overall integrated business solution.
Why Connect Payment Processing to Your POS?
- Detailed sales reports: View all of your payment and sales data in one place, including top customer payment methods, track discounts, and quickly spot any discrepancies, instead of having to check and consolidate data from multiple platforms.
- Automated CRM and loyalty programs: Many POS systems offer loyalty programs that can identify customers by payment method, which automates the process of having to manage points.
- Digital receipts: POS systems that can recognize a customer based on payment methods can also pull up contact information and easily send digital receipts.
- Reduce human error: Employees don’t have to manually type in a charge amount on a separate credit card machine; The POS system calculates the total and charges customers the correct amount.
- Provide faster service: Eliminating the additional step of entering products or sales totals into a separate system makes the checkout process faster.
POS Payment Processing Benefits
Having a payment processor that’s connected to your point of sale system significantly simplifies the process of reconciling transactions with inventory counts and financial reports. It also reduces human error and makes the POS more powerful with payment data. A connected payment processor is so essential, many POS systems now offer built-in payment processing, so you have no choice but to use one system for both.
POS Payment Fees
Although there are many POS services, software, and devices that advertise themselves as free, the only kind of sale that has no cost whatsoever is in-person cash or check transactions. And even then, you’ll have to pay taxes. Digital payments will always charge a transaction fee.
Below is a list of the most common costs associated with a POS system:
- Monthly Price: Many POS systems charge a monthly software fee. For very small businesses, a free system like Square works. For growing companies or businesses with detailed inventory needs, a specific retail POS like ShopKeep or restaurant system like Toast, with monthly fees starting under $100 are a better fit.
- Transaction Fees: This is the amount you pay per credit or debit transaction. The banks processing these payments behind the scenes charge a fee, as do the card companies like Visa and Mastercard. Plus, whatever credit card processing or POS system you are using will also add a fee. There is no way to avoid these fees, and they vary wildly depending on your business and the service you use. However, one example of a typical transaction fee is from Lightspeed POS, which charges 2.6% plus 10 cents per transaction.
- Equipment Costs: The highest up-front cost of your POS payment system is the hardware you buy or lease. Hardware can include terminals like computers or iPads, printers, scanners, credit card machines, cash drawers, mobile devices, and more. Many POS providers sell complete hardware packages for a flat price. For example, ShopKeep sells a basic hardware kit for $800.
- Taxes: Every sale and transaction you conduct is subject to tax by the local, state, and federal government—or national government if you’re doing business outside the United States. The best POS systems will automatically calculate how much you need to pay, to whom, and when.
A POS payment is a standard credit card transaction processed through a point-of-sale system and integrated payment processor. This process streamlines in-store operations, provides more accurate data, and enables the POS system to perform more powerful functions by being able to associate customers with their payment method.