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Small Business Guide to POS: Point of Sale Systems and Software

Max Freedman
Max Freedman

Point of sales systems are the brains of your business, so it’s important to find a reliable option.

  • POS systems are comprised of hardware and software.
  • Hardware for a POS system can be as basic as a tablet or smartphone and a card reader. You can add peripherals like receipt printers, cash drawers and barcode readers for a more traditional setup.
  • Software for a POS system should include checkout capabilities, a product catalogue and reporting features. Nicer features include inventory tracking, customer management tools and integrations with the other business software you use.
  • This article is for the small business owner who wants to learn about POS systems before purchasing one for their business.

Thanks to many technological advancements, point of sale (POS) systems have been changing, ensuring that businesses can go beyond just processing transactions. POS systems have gone from cash boxes to cash registers to iPad minis and into other smart technology. Businesses now have features that are designed to boost sales, improve staff performance and make business owners' lives easier.

To better understand POS systems, use this guide on what to look for and how to find the best option for your business. For a more in-depth look at POS systems, check out our Credit Card Processing Buyer's Guide and our roundup of the Best POS Systems.

Parts of a POS system

In addition to accepting credit cards and cash payments, POS systems offer all-in-one solutions that allow businesses to become more efficient and even run their entire operations from their POS software.

Editor's note: Looking for the right POS system for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

Advanced features include customer relationship management (CRM), budgeting, analytics and reporting, inventory management and marketing tools. The systems can also connect to third-party apps and solutions businesses already use, helping save time and prevent headaches by automatically syncing data in real time as sales occur.

A POS system consists of two main parts: hardware and software. A simple hardware setup often comprises just two POS parts:

  • Internet-connected device. Often, this device is a tablet (typically an iPad), though it can also be a smartphone.

  • Card reader. This device connects via Bluetooth or plugs into your tablet or smartphone and reads credit and debit cards. Free magnetic stripe card readers are often available, but in most cases you should plan on upgrading to a model that has EMV technology so you can accept chip cards and NFC technology so you can accept contactless credit cards as well as mobile payments like Apple Pay and other digital wallets.

More complex setups may include the following POS equipment:

  • Monitor/display screen. Here, you’ll see all the details of the sale you’re processing and can view the next steps needed to complete the transaction.

  • Keyboard. Some POS systems include keyboards so you can manually enter transaction amounts or type in customer phone numbers or email addresses. Many of these keyboards have functions specific to certain industries, so make sure any keyboards you purchase meet all your daily needs.

  • Cash drawers. These drawers store not just cash, but receipts and other paperwork. They should be able to receive open and close signals from your digital POS interface.

  • Barcode scanners. These devices read the barcodes on the items you sell and convert this information to product names and prices that appear on your POS monitor. This function both facilitates sales and allows you to automate your inventory tracking.

  • Signature capture device. Although the card networks no longer require signature verification in most instances, your business may still find them necessary. These devices capture customer signatures digitally.

  • Receipt printer. To finalize the transaction, this device prints a summary of the buyer’s purchases. You should always ask the customer if they want the receipt, and it never hurts to keep a copy for yourself if your POS system allows for this.

See our recommendations for the best POS systems.

For restaurants, hardware packages typically include a touchscreen monitor, terminal, receipt printer, cash drawer and card reader. Like retailers, restaurants also have a mobile POS option – typical setups consist of an iPad or iPad mini, cash drawers and a kitchen printer. [Read related article: 5 Reasons You Need a Mobile POS System for Your Restaurant]

While these are common packages, most providers give business owners the flexibility of picking and choosing the hardware they need, which helps keep costs down.

The software is what runs the system. Software POS parts usually include the following:

  • Simple mobile app or cloud- or web-based programs. This option is best if you will be operating your POS from a mobile device. They allow you to make transactions from anywhere as long as you have your mobile device and card reader.

  • On-premise terminal programs. Alternatively, you can opt for programs only accessible on your business grounds at your cashier or another POS terminal.

  • Accounting software compatibility. A key part of a trustworthy POS software program is the ability to integrate with your accounting software so you can thoughtfully plan your company’s budget.

  • Inventory tracking. When you scan product barcodes upon purchase, your inventory tracking POS software automatically updates your stock counts to reflect recent transactions.

  • Gift card processing. Not all POS systems fully integrate with gift card programs. However, without this function, gift card processing can become needlessly complicated.

  • Purchase order creation. Think of this function as an extension of inventory tracking capabilities. Some systems can be set to automatically reorder products when your inventory is low and reaches a certain threshold. This feature can save you time reordering products and can ensure you have plenty of your most popular items available at all times.

  • Manage vendors and customers. Alongside purchase order creation for your vendors, you can also use some POS systems to manage your customers information. This way, you can capture customer contact information when you're ringing up a sale. Some systems also allow you to use your digital receipts to request customer feedback.

  • Track employee performance. You can use some POS systems to track employee metrics such as the volume of sales made, hours worked and (if applicable) tips earned.

According to Oracle, cloud-based, mobile-enabled restaurant POS platforms provide restaurants with benefits such as faster innovation, lower IT complexity and costs, exceptional guest experiences and increased security.

In addition, each specialty package, such as the one for restaurants and bars, offers its own unique features. Examples for a bar may include the ability to track bar tabs, split checks and manage special pricing for certain events, like happy hour.

Key takeaway: POS systems are comprised of hardware and software. You can choose a simple system with minimal features or an advanced system that can help you manage multiple parts of your business.

What to look for in a POS system

There are several choices that business owners must make when they're selecting a POS system. Among the most important things to look for are the following items.

  • Terminal and peripherals: What type of hardware do you want? The best POS providers offer mobile and touchscreen systems, barcode printers, customer displays and PIN pads.

  • POS software: Each POS system is only as good as the software that runs it. It is critical that business owners choose a system that offers software with the features they are looking for. This depends on a business's industry and unique needs and whether the company is choosing a traditional or mobile POS system.

  • Mobile and wireless technology: At the very least, business owners should consider a POS system that offers wireless tableside or inventory tools. The best providers offer software that is compatible with most Apple and Android mobile devices.

  • After-purchase care: Good customer support is a must. A POS system becomes the brains of a business, so when the system has a problem, it can bring the whole operation to a standstill. Finding a POS system provider that offers after-hours telephone support, installation assistance, training and remote support should be a priority for business owners.

Key takeaway: Before choosing a POS system, you need to consider what hardware you need, what software features you want and whether you want a mobile or stationary system. You should also make sure the vendor provides good customer support.

The best POS systems

Each business has its own set of needs. With so many different options for POS systems and features, it can often be hard for business owners to figure out which systems are the best for them.

To help owners find the right system, Business News Daily has done extensive research and analysis to compile this list of the best POS systems for small business. Our list includes the best POS system for retailers, restaurants and small businesses overall. Additionally, we have included a roundup of dozens of POS system vendors that we considered for our best picks.

Key takeaway: There are a lot of POS systems available and finding the right one for your business can be challenging. Reading product reviews can help you narrow your options and identify the systems you want to learn more about.

Image Credit: DERO2084 / Getty Images
Max Freedman
Max Freedman
Business News Daily Contributing Writer
Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. He's also published articles on payroll, small business funding, and content marketing. In addition to covering these business fundamentals, Max also writes about improving company culture, optimizing business social media pages, and choosing appropriate organizational structures for small businesses.