For the question of what is POS, it’s a point-of-sale (POS) system software that ties the sales, inventory and management functions of any retail-type business within a single, streamlined system. Many POS systems can operate on just a single mobile device like a smartphone or tablet and can also drive one or more countertop registers, complete with cash drawers, scanners and receipt printers.
This guide answers the question: What is POS and what is a POS system? We walk you through the features that most POS systems offer, their costs and which POS systems are best for certain business needs.
If you want to test-drive a top-rated POS system risk-free, we recommend checking out Square. Square’s free POS is loaded with inventory, sales, customer and employee management features. Plus, credit card processing is built-in, so you can start accepting in-store, online and mobile POS payments as soon as you sign up for your free Square POS account.
What a Point-of-Sale System Does for You
A POS system takes the place of traditional cash registers to simplify your point-of-sale checkout process. However, that just scratches the surface of how a POS can improve your overall operation. With a POS system, you can:
- Complete sales using countertops registers and/or mobile devices
- Process credit and debit card payments instantly
- Record cash and check payments
- Print and/or emails sales receipts to customers
- Create detailed product lists with variants like color and size
- Add and record products to each sale
- Track stock quantities in real-time as products sell
- Collect and store customer contact information
- Track staff logins, sales and schedules
- Track commissions and/or tips per employee
- Track in-store, mobile and online sales within one system
- Manage email and loyalty marketing programs
- Compile an array of sales, inventory and business reports
- Connect sales and inventory data with top bookkeeping programs
Most POS systems are cloud-based and can use mobile devices like smartphones and tablets or Mac and PC computers to accomplish these tasks.
POS systems come in many price points, too. Some, like Square’s free POS, provide complete functionality using just a smartphone or tablet, so you can enjoy the benefits of a POS system with virtually no upfront costs at all. Then, as you grow, you can easily expand to run multiple countertop registers or even several store locations. Others, like Lightspeed POS, have monthly fees to access the software but offer a more advanced set of tools like detailed advanced inventory and employee tracking capabilities.
Point-of-Sale Features in Detail
Free or paid, all POS systems deliver a basic set of features that help you oversee every aspect of your business. Here’s a look at ten ways a POS system improves your daily workflow and simplifies overall business management.
1. Sales & Checkout Process
A POS system creates a quick and seamless checkout experience for your customers. At checkout, staff can add items easily to a sale via bar code scan or touchscreen entry. Totaling the sale happens instantly and coupons, loyalty points or other discounts can be applied at the touch of a button.
To complete the sale, a POS system accepts and records check, cash, credit card and even gift card payments plus lets customers split payments any way they wish. Credit card signatures can be collected electronically or on paper and receipts can be printed or emailed, whatever the customer’s preference.
2. Credit Card Processing
POS systems automatically connect credit card transactions to your checkout process. This simplifies and speeds up your checkout procedures and end-of-day reconciliation tasks. Unlike a typical credit card terminal and cash register setup, with a POS system, you don’t run a separate end-of-day charge report and reconcile tickets to sales. It’s already done for you.
POS systems also make it easy to accept credit cards wherever you make a sale. You can connect card readers to smartphones and tablets for mobile sales, accept online payments via your website or enter phoned-in payments using your POS system’s virtual terminal. All of this is above and beyond what you can do with a basic credit card terminal and cash register setup.
3. Mobile Device Payments
If you want the freedom to accept payments anywhere you do business, POS systems deliver. Most have mobile POS apps, referred to as mPOS, which let you make sales, accept payments and handle other key business functions from your smartphone or tablet. Many, like Square, are complete mobile-based and work primarily on devices like iPads, iPhones and some Android devices.
With these systems, your checkout functions all happen via card readers connected to a tablet or mobile phone, shown above. Plus, you can access your management dashboard and enter payments via a virtual terminal on any computer.
4. Inventory Management
Inventory features are one of the top reasons that businesses adopt a POS system. Virtually every POS system on the market stores key product data such as supplier information and wholesale cost; regular, sale and discount prices for items; variables, such as size or color; and current stock quantities. Some POS systems, like Square Retail and Lightspeed Retail, also offer advanced inventory features that help you manage purchase orders, track parts for assembly products and make intra-store stock transfers.
Most POS systems also integrate your inventory data with various e-commerce platforms to automate real-time stock updates between your POS system and online sales channels. Simply put, if you need to track inventory anywhere, a POS will improve the process.
5. Centralized Multichannel Sales
A POS can connect your in-store and online sales activities in one convenient, centralized system. Many POS systems integrate with a number of online sales platforms and sync your sales, payments, customers and even inventory counts between your in-store system and online sales channels. Some, like Square and Lightspeed, offer both integrations and built-in e-commerce solutions like this:
For retailers that want to expand their reach by selling on a website; through seller marketplaces like Amazon, eBay, Etsy; or via social media channels, a POS can make it all extremely efficient.
6. Customer Management
POS systems let you record customer contact information and track every purchase down to the fine details. You’ll know what items each customer purchased and when, how much they paid, what payment method they used and even if the items were returned at a later date.
This data is immensely helpful in overall sales management, but it also plays another important role by helping you fine-tune marketing efforts. Knowing who purchases what most often lets you craft targeted promotions like marketing emails and send them to the customers most likely to respond. Without a POS system, targeting buyers based on their purchasing history is nearly impossible.
7. Sales Data Tracking
POS systems track every sale in detail, which gives you a wealth of data on which you can base key business decisions. Even the most basic sales reports tell you which items are your top sellers and slowest movers to help you make informed purchasing decisions. Sales tracking also helps you pinpoint and predict seasonal upticks in certain categories or overall sales so you can plan your inventory and staffing to meet your busy cycles. Many POS systems let you track sales by employee for commissions or internal rewards programs.
8. Employee Management
POS systems offer a variety of employee management tools. Employee sign-in, basic timekeeping, scheduling and commission tracking are found in the basic features of most POS systems. For added fees, you can access or integrate a complete payroll management within your POS to centralize all of your sales, business management and payroll tasks in one system. For example, you can turn on Square’s built-in payroll features for $29/month and $5/month per employee. Others integrate directly to a number of top payroll providers like Lightspeed POS and Gusto.
9. Marketing Integration
Most POS systems offer either built-in email marketing tools and if not, they connect to third-party email marketing solutions easily. Either way, a POS system makes building an email list and keeping it updated a snap. When you’re ready to send marketing emails, you can use your customers’ order histories to target your promotions to those customers most likely to respond. Tying your order history to your email campaigns helps you create far more effective campaigns and a POS makes it all possible.
10. Loyalty Programs
Customer loyalty programs take marketing a step further than email marketing by giving your customers an ongoing reason to frequent your store. Loyalty programs work a number of ways. You can use one to build points toward free gifts or discounts or to offer members special treats like early-buy events, coupons or appreciation days. However you set yours up, it’s all managed easily in most POS systems. Some, like Square, provide a built-in loyalty program for a modest monthly fee. Others, like Lightspeed and ShopKeep, integrate with a variety of third-party loyalty program options.
“Square is a game changer recordkeeping-wise. We get to see which product category sold best that day and salesperson totals for commission. It also has a loyalty program built into it. I used to have to keep all the tape rolls from my old register — now, sales data is a click away. When I need to give my accountant my tax information, I can just pull it online. Keeping notes on customers has become really easy as well. For example, we have a refill program in place and people can prepay and save money. We manage it all right on the register — no other paperwork necessary.” — Roberta Perry, Owner, ScrubzBody.
When you consider everything that a POS system offers, it’s amazing to know that some POS systems actually are free to use. Plus, the paid versions all offer free trial periods, so there’s nothing stopping a seller from test-driving one or more POS systems risk-free.
Next, let’s explore what specific top-rated POS system offer and cost so you can narrow your search to those that meet your budget and operational needs.
POS System Providers and Costs
There are many POS systems on the market — some are free while others charge monthly fees. However, POS system access is just part of your potential costs. Depending on your checkout register needs and the types of payments you accept, you might face startup hardware costs and ongoing credit card processing fees.
Here’s a quick look at 10 top-rated small business POS system providers, their basic costs and the types of companies they’re best-suited for. Below, we examine other considerations such as hardware costs and credit card processing fees.
10 Top-rated POS System Monthly Costs & Best Business Fit
|Square for Retail|
As you can see, there are several free POS systems on the market. For small establishments, running a free POS system like Square on a smartphone or tablet can provide everything needed. But, some operations might need specific features like advanced inventory tracking or restaurant workflow management. If so, a POS system with advanced features adds efficiencies that are well worth the monthly fee.
“The POS system you choose depends on your business and the details that you need to know about to run your business effectively. An entry-level POS system might be enough for some retailers but not enough for others. The system you choose should cover what you need today but have additional the capability for what you’ll need tomorrow. Think frequent shopper programs, inventory management, purchasing histories and the ability to collect email addresses — the list is endless because it builds as your store grows and changes. You want a POS partner that understands the expanse of knowledge you need now and in the future.” — Rich Kizer & Georganne Bender, Retail Store Design Consultants, Kizer & Bender
Now, we’ll examine the two other expenses that potential POS users need to consider: credit card processing fees and checkout register costs.
POS System Credit Card Processing Fees
Credit card processors, commonly called merchant services providers, charge a fee for processing credit cards. This is in addition to any fees you pay to your POS system. But, remember, whether you use a POS system or basic terminal, you still have to pay credit card processing fees to your payment provider. So, using a POS system doesn’t necessarily increase your cost of accepting credit cards. It just makes the process easier compared to using a standalone credit card terminal.
Some POS systems, like Square, actually include credit card processing as part of their service, so everything is built into one convenient system. Others, like Lightspeed, require that you connect your own merchant account. This requires more setup, but it allows you to price-shop different processors to get lower fees.
Here’s a quick look at the cost differences between these two options. You’ll see below that Square’s all-in-one solution generally is the less-costly option for sellers processing under $30,000/month in credit card sales. Over that amount, pairing Lightspeed POS with a low-cost payment processor, like Cayan, can save you money.
POS Credit Card Processing Fees Compared
120 total sales
2.75% per swipe
No transaction fee
2.01% per swipe
25¢ per transaction
361 total sales
2.75% per swipe
No transaction fee
2.01% per swipe
25¢ per transaction
You can learn more about your credit card processing options and the cost differences between different types of processors in our credit card processing guide.
POS System Hardware Costs
Most POS systems work on iPad, iPhone and some Android devices. If you already own one of these, you can start out with just a free credit card reader and few, if any, added hardware costs. However, if you need checkout registers, cash drawers and receipt printers, those hardware costs can range from a few hundred dollars for a Square iPad stand, to several hundred dollars for a full POS checkout station.
Here’s a look at some POS checkout register options and costs with startup-friendly Square and a more advanced POS system like Lightspeed.
POS Hardware Options & Costs Compared
Add iPad: $498
$49/month for 24 months
“When choosing a POS for our store, we did a full evaluation of both Vend and Square, but the integrated payment functionality of Square is what ultimately sold us on that product. With the Square for Retail software add-on, which gives us the ability to track inventory and cost of goods sold (COGS), we found that Square worked as a full end-to-end solution for our store. Having our POS, inventory tracking, COGS tracking and payment solution all in one software streamlined our operations drastically.” — Mike Starr, Business Affairs, Fourth Home & Interiors
The Bottom Line
“What is POS software and how can it help my business” is a question that many small sellers ask. Modern, low-cost POS systems provide a very clear answer: a POS system is something that ties your checkout processes to all other key store management functions. However, that really just scratches the surface of what POS systems offer.
Both free and paid POS systems make it easy to make sales and accept payments anywhere, including in-store, mobile and online sales. Plus, POS systems directly connect your sales data and marketing efforts so you can create very targeted marketing emails, SMS messages and loyalty program offers to entice customers back for more. Inventory and staff management tools help you minimize shrinkage, spot errors and control costs across the board.
If you’re ready to see how a POS system can take your retail store, cafe, restaurant or other sales operation to the next level, we recommend trying Square on for size. It costs you nothing to take the system for a test-drive and, odds are, you’ll be mighty impressed by how it handles.
Do you use a POS system in your retail, restaurant or multichannel sales operation? We’d love to hear which POS system you chose, your implementation experience and how it’s working for you in the comments section below.