What is a Point of Sale System?

Managing a retail store is a difficult task and calls for all manner of skills, including sales management, employee management, inventory management, and reporting. Without a mastery of these tasks, your retail chain–be it a grocery store or a boutique or a restaurant–can face serious roadblocks in an already tenuous economic outlook. This is especially true at the moment transactions are made with your customers: at the point of sale.

So, what is a point of sale system? We get into the details of what might be included in your point of sale system a little later. But in short, utilizing a Point of Sale system (or POS System) will help you to make sure that everything is running like a well-oiled machine.

What is a point of sale system? The point of sale system is where every transaction with your customer takes place. It may sound simple, but trust us, there’s more than just swiping a credit card and getting a receipt. The POS is the system that everything else relies on. All aspects of running a retail business work from the centralized POS hub. 

Yet despite the necessary nature of a POS, one survey from Software Advice found that 56% of stores are not using one. Most are still using manual methods, including pen and paper, Excel spreadsheets, and Quickbooks to handle their bookkeeping. 

If it can be so beneficial to a business, then why are so many reluctant to have one? For starters, it’s hard to move from a tried-and-true method of management–one that has been used for generations–and adopt a new technology. For another, there are modest cost outlays for equipment and software. But, as we’ll see, they more than pay for themselves.

What is a Point of Sale System Comprised Of? Point of Sale Hardware and Software

A point of sale system includes everything that is needed to initiate, execute, and document every transaction between your business and your customers. Every point of sale system has both a hardware and a software component unless you are electing to only utilize online payment processing, which only includes the software.

Point of Sale System Hardware

Here is a breakdown of the hardware items that may be required, depending on which point of sale system you select:

Monitor or Tablet: You have to have somewhere to view your information, whether it’s a customer transaction or an employee logging in or logging out. Tablets are increasingly beating out traditional monitors, though monitors can still work if you’re on a strict budget.

Barcode Scanner: Odds are you already have one of these, and there’s a likelihood that you can link it to your new POS software. If not, the newest barcode scanners are dirt cheap. These scanners help not only in ringing up purchases but also in inventory management as they can not only count the items that you’re selling (and know what you’re running low on) but they can automatically make orders for new products that are selling out quickly.

Credit Card Reader: This is a place where new is a must. Since the EMV payment standard (EMV is the Europay, Mastercard, and Visa standard and refers to a new–as of 2015–standard that all chip readers must meet.) Odds are you’re using one (or you’re in violation of the law!)

Receipt Printer: As tablets have been on the rise, so have emailed receipts. Many people waive their receipt or have it sent to their email, but you still must have a printer on hand if someone wants a paper copy.

Cash Drawer: As the epidemic has discouraged the use of cash, many have been speculating about the death of the cash drawer, but it still seems to have some life left. It won’t be going away anytime soon.

Point of Sale System Software

While the hardware part of the point of sale system is pretty straightforward, point of sale software is a different story. Most point of sale system software varies widely between the brands you’re using for both your hardware, and your merchant services or payment processors. 

For instance, the Clover POS System is an all-in-one solution that comes with both the hardware components, and the built-in software solution. 

But not all point of sale systems have all the bells and whistles, and you may need to manage your point of sale system software differently based on the hardware you choose to use, and what partner you select to help with your merchant services

Using Point of Sale Systems to Manage Your Transactions

You want transactions to be as easy for you as they can be, to make the transaction swift and painless (and accurate). POS systems have that in mind.


Your point of sale should make tipping simple, and it’s especially easy if there’s a tablet or touch screen that makes the tipping calculations for you. This is a must for the service industry. Studies have shown that a paperless tipping system (such as a tablet) will cause tipping to increase.

Inventory Database

Ringing your customers up should be easy and shouldn’t have anything that stands in the way of making the purchase fast and painless. An easy-to-navigate inventory database, where the employee can quickly find the item (if you’re not using a barcode scanner, say at a restaurant) will make a world of difference and may just earn you a better tip.

Managing Your Employees

A proper POS system should have the ability to manage the employees’ actions (though it obviously doesn’t take the place of a manager). A POS should be able to add new employees to the system, create and modify schedules for employees (perhaps even in an automated way that forecasts time of maximum need), message employees with important information (either through email or text), track employees’ schedules including overtime, and perhaps most importantly, have metrics to identify who your top performing employees are. 

Managing Your Inventory

Your Point of Sale system helps to make the inventory tracking, management, and reordering of products much simpler. Keeping track of which items are being sold, the inventory management system, controlled by the POS, identifies what items are in need of restocking, and which SKUs are not performing well.

A POS should be able to give you reminders when certain product SKUs are running low to allow you to order more (a more advanced POS system would do the reordering for you, but those systems are usually for larger retail outlets like supermarkets and department stores.)

But ideally, a POS should be able to interface with your ordering system and allows you to make inventory orders from within the software. This feature takes out cumbersome features that require you to alternate between two system and in some cases make the entries by hand. 

Customer Relationship Management

Finally, a good POS should help you in maintaining a good relationship with your customers. By identifying data about customers’ purchases and schedules, the POS may be able to make recommendations for when a certain customer is out of a certain product. For example, a customer who buys a crib and baby seat could later receive notifications about sales on diapers.

Other customer relationship management features include the ability to have customer loyalty systems, monitoring purchases, dollars spent, and other factors that could lead to customer retention and happiness.

Need to Get Started with a Point of Sale System? Let us Help You!

If you are reading this article to answer the questions, “What is a Point of Sale System?”, then you might need a little more detail on the ins and outs of your options before you get your shop started. Luckily, Velocity Merchant Services is here to help!

Get in touch with our payment processing experts, and we will help you find exactly what you need to get your store, online shop, or mobile business up and running. 

To learn more about a specific type of merchant service or payment platform, check out the payment processing solution that works best for you:

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