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How to Interpret and Learn from POS Sales Reports

Lori Fairbanks
Lori Fairbanks
Domain Editor

POS sales reports provide a treasure trove of information that can help you spot trends and manage inventory.

  • POS sales reports can give insights into sales and inventory trends so you can optimize promotions.
  • To effectively interpret and learn from POS sales data, you have to start with a question.
  • Identifying patterns and trends in your POS sales data can help you understand customer buying patterns, seasonality, and the effectiveness of your marketing efforts.
  • This article is for business owners who want to use their POS sales reports to grow their operations.

POS systems come with dozens of sales reports that can give you a wealth of statistics about your business. Most systems have a dashboard that displays key metrics plus a variety of reports that you can customize with filters to get an in-depth look at your sales data.

The at-a-glance information on the dashboard is extremely useful – it's a barometer that shows you an overview of how your business is doing, with graphs and lists that show key metrics such as how many sales you've made for the day, whether your daily sales volume is trending up or down and which products your customers buy the most. You'll want to check this information at least once a day to get a feel for what's normal for your business.

The reports give you a comprehensive look at your data, so you can dig into the numbers and find specific information about your sales, products mix and inventory levels, employee performance and customer preferences.

With so much data available, the challenge is figuring out how to sift through it to find insights that help you identify what's working well, which issues that you need to fix, areas where you can improve and opportunities that can help your business grow. Read on to learn the four steps that can help you interpret and learn from POS sales reports.

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What is a POS sales report?

In addition to ringing up sales for your store or restaurant, POS systems capture information that can be used to inform all sorts of business decisions. Every time you ring up a sale or enter inventory into the system, data is collected and analyzed. Business owners can run reports daily, monthly, quarterly and annually to analyze that data.

Through these POS reports, business owners get actionable information on sales trends, employee performance and inventory. It can give you an overview of the entire business or a snapshot of different area of your business. Since POS systems integrate with your back-office software – like your accounting program – you can get a detailed picture of the health of your business. If you're working with a cloud-based POS vendor, you get the added benefit of being able to access reports on-demand and on the go. You don't have to be at your store or restaurant to run POS sales reports since everything resides in the cloud.

Key takeaway: POS sales reports organize sales, employee and inventory data. They can give you an overview of operations or a detailed look at particular aspects of your business.

Types of POS system sales reports

Here are three key reports you should plan to run regularly.

  1. Sales summary: This is the most common type of sales report because it gives you an overview of how your business is performing. It gives you a look at your sales at a point in time – it could be sales for the end of the night, week, month or year. A comprehensive sales report shows the cost of goods sold, your gross profits, your profit margin, and the taxes on your sales.
  1. Sales per product report: If you want to get more detailed data about your sales, you can run reports based on the product type. This helps you identify which products are doing well and which are languishing on store shelves. It can also help you identify trends and seasonality, which can inform how much inventory you reorder.
  1. Sales per customer report: It's important to ensure your business resonates with customers, and to do that you can run a sales report on the customer level. That enables you to spot your best and worst customers or customer groups. Armed with that knowledge you can tailor your marketing and outreach efforts.

Key takeaway: There's plenty of sales reports you can run but there are a handful you can't ignore. They include the sales summary, product sales report and customer sales report.

What are the benefits of generating sales reports?

Sales reports can be basic or detailed depending on what information you are aiming to glean from them. There are a lot of benefits from going beyond the basics, though. Here are three ways benefits of generating and analyzing sales reports.

  1. Make smarter purchasing decisions: You can't afford to be out of your hot items and stuck with a glut of slow-selling products. Without automating the purchasing process, that can easily be the case. POS systems include or integrate with your inventory management and tracking software to update items in real time as they are purchased. By running a sales report, you can identify which products are doing well, which aren’t, and where you need to restock.
  1. Target the right customers for sales and promotions: The last thing you want to do is run a sale or promotion and have nobody show up. POS sales reports can help you see what discounts and deals your customers have responded to in the past, and which segments of customers are receptive to your promotions, so you can focus your efforts there.
  1. Compare sales from several stores: For business owners running more than one retail location, staying on top of sales in each location can be difficult. A robust POS system with advanced reporting features will enable you to track and compare sales across multiple locations. That can help you determine if you need to raise or cut prices in one location, put more staff on the sales floor of another, or spend extra cash marketing in a particular area.

Key takeaway: There are a lot of benefits to running sales reports through your POS system. It can help you make better inventory decisions, compare sales from different store locations, and develop more effective promotions and marketing campaigns.

How do you interpret POS sales reports?

1. Start with a question.

The first step is to decide what you want to learn from the POS sales report data. What specific questions do have about your sales, products, inventory, employees or customers? Do you want to know whether you should reorder a certain product? Do you want to know if the promotion you ran last week was successful? Do you want to know which employee routinely has the highest sales volume? Do you want to know who your best customers are and what product categories or brands keep them coming back to your business?

Asking the right question helps you narrow in and focus on the data that can answer it and help you gain a better understanding of what's happening with your business, so you can make informed decisions. [Interested in finding the right POS system for your small business? Check out our best picks and reviews.]

2. Gather and measure data.

Once you figure out the question, the next step is to decide which report can give you the data you need to answer it. You also need to decide if there are filters you need to apply to find the right data set, such as date ranges. There may be multiple reports or filters that allow you to look at the data from different angles, augment it with additional details or isolate it from other variables.

Next, examine your sales data over time – compare your current data to the previous day, week, month and year. This helps you figure out your sales averages and gives you a benchmark to measure current numbers against.

Jim Barksdale, the former president and CEO of Netscape said, "You cannot manage that which you cannot measure." If you don't know what your averages are – if you don't "measure" your data by comparing it against historical numbers, you won't be able identify abnormalities that alert you that something – either good or bad – is going on with your sales.

3. Look for patterns and identify trends.

The next step is to look for patterns in the data. This can give you insights into your customers' buying habits, revealing information such as seasonal trends or showing you whether your latest promotion brought in more customers than normal or contributed to a higher volume of sales in an ordinarily flat time period. This information can help you plan ahead, and decide whether you should increase, decrease or hold steady on reorder quantities, promotional efforts or other activities.

As you analyze the data, consider the big picture of what was happening at the time that might explain the numbers. For instance, if you notice an item that was hot three months ago is now one of your worst-selling items, should you discontinue the product? What happened to cause the drop in popularity?

Perhaps if you look at the sales data for this product over a larger period of time, you'll discover that it's a seasonal item, and find that your low sales numbers are consistent for this time of year. Seeing how sales trend for this item helps you decide how to move forward. Maybe you decide to remove the product from your set this season, but order extra before it's in season next year so you have plenty on hand when your customers want it.

Data patterns can also help you identify opportunities for cross-selling. If you discover that customers tend to purchase certain items together, you can make it easier for customers to find related items, either by displaying them together, offering them as a bundle or asking the customer if they're interested in the related item when they place their order or at checkout. For instance, if a customer orders a desk, perhaps they'll be interested in buying a chair to go with it, especially if they receive a discount if they purchase the items together.

4. Apply context.

To interpret the data trends that you find and learn from in your sales reports, you also need to apply context. Context is the information beyond the statistics that explains why customers are purchasing (or not purchasing) certain items. It can be external, such as seasonality, weather, road construction, competitor actions or supplier activities – such as tariffs, pricing increases, discounts or special deals. Or, it can be internal, such as gaining or losing employees, adding or removing products or services, running promotions or raising prices.

Bringing context to your POS sales reports helps you understand the story behind the numbers, so you can interpret what's really going on with your sales. Context may be able to explain why you had a sudden uptick in sales for a certain item, an unusual drop in foot traffic, or other anomalies.

Having the story that explains the data helps you respond appropriately to it. For example, if an item is suddenly popular, contextual information can help you decide if you should rush to reorder a larger-than-usual quantity of an item, or if you should be cautious and reorder the same amount as usual.

Expanding on the above example, imagine you have a children's clothing store and suddenly sell out of the little white gloves that you usually sell just a few pairs of around Easter and Christmas. Finding out that a local dance class is using them as part of a costume for an upcoming performance explains the demand. This is important, because if you don't know the context – in this case, what caused the demand – you may assume it's a trend and reorder a much higher quantity. Then, because it was a one-time occurrence, you would be left with a large amount of overstock that you must sit on or deeply discount to move. Whereas with the context, you realize that it's a one-time occurrence and decide to restock at the same levels as before.

Interpreting and learning from POS sales reports is an ongoing task that you'll perform on a regular basis as long as you run your business. As you get more familiar with your data and your POS system, the process will get easier. You'll be able to ask more in-depth questions about your sales numbers, product mix, employee performance and customer behavior. You'll figure out which reports and filters will lead you to the answers to your questions and what patterns you should look for in your data. You'll also put the data in context and consider how various factors have contributed to the story that your sales figures are telling you so that you can make smart decisions that help your business prosper.

Key takeaway: Running reports isn't enough; you need to interpret the data to gain insights into what the numbers mean and then decide how you can use the insights to make decisions for your business.

Additional reporting by Donna Fuscaldo.

Image Credit: rez-art / Getty Images
Lori Fairbanks
Lori Fairbanks
Business News Daily Staff
Lori Fairbanks is a writer and editor for business.com and Business News Daily who has written about financial services for small businesses for more than seven years. Lori has spent hundreds of hours researching, analyzing and choosing the best options for critical financial-related small business services, including credit card processing services, point-of-sale (POS) systems and employee retirement plans. Lori's publishing experience is extensive, having worked as a magazine editor and then as a freelance writer and editor for a variety of companies.