Point of sale (POS), a critical piece of a point of purchase, refers to where a customer executes the payment for goods or services and where sales taxes may become payable. It can be in a physical store, where POS terminals and systems are used to process card payments or a virtual sales point such as a computer or mobile electronic device.

Point on sale

Understanding POS

Points of sale (POSs) are an important focus for marketers because consumers tend to make purchasing decisions on high-margin products or services at these strategic locations. Traditionally, businesses set up POSs near store exits to increase the rate of impulse purchases as customers leave. However, varying POS locations can give retailers more opportunities to micro-market specific product categories and influence consumers at earlier points in the sales funnel.

For example, department stores often have POSs for individual product groups, such as appliances, electronics, and apparel. The designated staff can actively promote products and guide consumers through purchase decisions rather than simply processing transactions. Similarly, the format of a POS can affect profit or buying behavior, as this gives consumers flexible options for making a purchase.

Amazon’s concept convenience store, Amazon Go, which deploys technologies that let shoppers come in, grab items, and walk out without going through a register, could revolutionize POS systems.1 Besides increasing convenience, this could enable POSs, loyalty, and payments to be rolled into a single customer-centric experience.

Benefits of POS Systems

Electronic POS software systems streamline retail operations by automating the transaction process and tracking important sales data. Basic systems include an electronic cash register and software to coordinate data collected from daily purchases. Retailers can increase functionality by installing a network of data-capture devices, including card readers and barcode scanners.

How does a POS system work at a small business?

A POS system allows your business to accept payments from customers and keep track of sales. It sounds simple enough, but the setup can work in different ways, depending on whether you sell online, have a physical storefront, or both.

A point-of-sale system used to refer to the cash register at a store. Today, modern POS systems are entirely digital, which means you can check out a customer wherever you are. All you need is a POS app and an internet-enabled device, such as a tablet or phone

1. A customer decides to buy your product or service. If you have a physical store, they may ask a sales associate to ring them up. That associate could use a bar code scanner to look up the item’s price. Some POS systems, such as the Square Point of Sale, also allow you to scan items visually with the camera on your device. For online stores this step happens when a customer finishes adding items to their cart and clicks the checkout button.

2. Your POS system calculates the price of the item, including any sales tax. Then the system updates the inventory count to show that the item is sold.

3. Your customer pays. To finish their purchase, your customer will have to use their credit card, tap card, debit card, loyalty points, gift card, or cash to make the payment go through. Depending on the type of payment they choose, your customer’s bank then has to authorize the transaction.

4. The point-of-sale transaction is finalized. This is the moment when you officially make a sale. The payment goes through, a digital or printed receipt is created, and you ship or hand your customer the items they bought.

Which types of hardware and software does a POS system typically include?

Every POS system uses POS software, but not all businesses need POS hardware.

If you have an online store, then all of your sales happen on your website, so you don’t need POS hardware to help you accept payments. But if you have a cafe, you may need a register and a credit card reader. If you operate a food truck, a

Common types of POS hardware

POS hardware allows you to accept payments. If you’re getting a new POS system, you should make sure it agrees with all forms of payment, including cash, credit cards (especially chip cards), and mobile payments. If it makes sense for your business, your POS system should also print receipts, store cash in cash drawers, and scan bar codes.

This list of hardware can give you a place to start as you’re evaluating your POS setup options.

Register: A register helps you calculate and process a customer transaction.

Connected device, such as an iPad or other tablet: A portable device can be an excellent alternative to a monitor. Tablets can be propped up with a stand, allowing your team to clock in and out.

Credit card reader: A card reader lets your customers pay securely by credit card while in-store, whether through a contactless payment like Apple Pay, a chip card, or a magnetic stripe (magstripe) card.

Cash drawer: Even if you accept contactless payments, you may still need a safe spot to keep your cash. POS software that’s connected to a cash drawer can minimize fraud by tracking exactly when the drawer is opened.

Receipt printer: A paper receipt shows customers exactly what they purchased, when they purchased it, and how much they paid.

Bar code scanner: A bar code scanner reads an item’s product details so you can ring it up. It can also be a quick way to double-check the price, the stock level, and other details.

Common POS software features

POS software is like your command center. At a basic level, it allows you to find items in your library and ring up sales. More robust point-of-sale solutions also feature helpful tools such as sales reporting, customer engagement software, inventory management, and more. POS systems also take care of routing funds to your bank account after each sale.

Some POS solutions, such as Square, include the features below. Other systems may require you to use outside software to get the features you need. Learn more about how Square compares to other POS systems.

POS reports

POS reports give you a quick look into how much you’re selling and earning. With clear reports, you can sell more and make better business decisions.

Employee management

Team management software lets you know when your employees are working and how they’re performing. Your team can also use it to clock in and out, and some types of software can grant permissions so employees can get access to certain tasks.

Customer relationship management (CRM)

A CRM tool that’s tied to POS software lets you see what your customers bought and when they bought it. This knowledge helps you personalize your communications, marketing, and customer service.

Receipts

Receipts make processing refunds easier, since there’s a digital or paper trail connected to the purchased item. They can also make your business look more polished.

Tipping support

For restaurants and service professionals, tips can be a big part of getting paid. POS solutions that allow customers to add a digital tip during the checkout process, make it more likely that they’ll tip.

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