Written by Dan Barraclough Published on 15 October 2021 On this page What is a POS System? Hardware for a POS System POS Features How a POS System Works Installation of a POS System Mobile POS Systems Expert Verdict Expand How do POS systems work? Find out everything and more with our detailed guide…What Is a POS System?A POS (point of sale) is what businesses use to process transactions. Combining software and hardware, modern POS systems allow you to manage different aspects of your business, from taking payments to managing your inventory and staff.In the past, businesses would use cash registers and log each sale manually, or use an on-site software installed on the company’s servers. Nowadays, most POS systems use the cloud to store data, meaning you can manage multiple store locations from one POS system, and access the software from any location. Hardware for a POS SystemThe best POS systems come with a wide range of hardware to help you take payments and interact with customers. The most common types of hardware are: POS Touchscreen Display or Tablet Most POS systems use iPads, Android tablets, or generic touchscreens to display the software’s main interface. Typically compact and user-friendly, these devices are simple to use and look far more stylish than traditional monitors. Barcode Scanner Barcode scanners read an item’s barcode and send its details to the POS system, typically displaying the item’s price and product information. You can also use barcode scanners to double-check prices or view stock levels for different items. Cash Drawer Cash drawers keep your cash safe. Even if your business accepts contactless and digital wallet payments, it’s likely you’ll need somewhere to store your cash. POS systems can be synced to your cash drawer to ensure the drawer only opens during a transaction. You can also keep track of every time the drawer opens, making it easy for you to detect fraud. Receipt Printer These devices print paper receipts, otherwise known as proofs of purchase. Receipts must display what the customer bought from your business, when they bought it, and how much they paid. Credit Card Terminal Also known as a credit card reader, terminals are used to process in-store credit card transactions, whether through contactless payments, chip and pin, or a magnetic stripe card. These days, we strongly recommend buying a credit card terminal that accepts all three. POS FeaturesPOS systems do more than just take payments. In fact, you can think of yours as an all-in-one retail management system, or restaurant management system if that’s your industry. The most common POS features are:Sales ReportingIt shouldn’t come as a surprise that point of sale systems gather data about your, well, sales. You can access this data and generate reports to help you understand how your business is performing. The best retail POS systems will typically provide these reports:Total sales volumeGross profitsBest and worst selling daysHighest or lowest performing productsInventory ManagementRather than manually counting items on your shelves or within your ecommerce store’s back end, you can let your POS system do it for you automatically with features such as:Expected stock vs actual stock levels – identifies instances of theft or logistical issues during stock takesDead stock alerts – identifies non-selling items to prevent over-ordering stock and maximise profitsRecurring orders – automates recurring orders for your most popular itemsStaff ManagementDon’t think of staff management features as keeping eagle eyes on your team. Instead, use the information generated from your POS – such as employee sales performance figures or average tip amounts – to offer incentives and rewards.Or, use this information to identify staff who might need extra training. Staff management features are designed to help you get the most out of your team. Of course, you can also view staff hours and keep track of schedules.Customer Relationship Management (CRM)Gaining new customers is crucial to growing your business. However, repeat customers are the holy grail. This is because they typically spend far more than first-time buyers. With CRM features, your POS system can help you:Analyze shopping habits – send personalized marketing messages to encourage repeat visits or purchasesIdentify repeat customers – use this information to build a customer loyalty programFollow up on lost sales – Send abandoned cart emails to encourage customers to finalise purchases and recapture lost sales How a POS System WorksAs we mentioned earlier, POS systems offer many different functions to help you run your business more efficiently. But how does a POS system work? Well, it combines a software interface with items of hardware. Information is passed between these items via the cloud, where all the resulting customer data is stored.To demonstrate what POS systems can do, we’ve explained some of the main POS functions below…Inventory ManagementA POS system is like an inventory library. From the main interface, you can keep track of stock levels, generate stock reports, and even reorder items. On some systems, you can set up automated re-ordering for when certain stock levels are low.Staff ManagementToday’s cloud POS systems can double up as HR and payments solutions, helping you manage staff more effectively. These systems can accurately track your staff’s working hours, schedule different shifts, and carry out start-and-end cash counts to help prevent fraud. POS systems have also turned employee training into a breeze thanks to their intuitive and user-friendly software.Multi-Store ManagementThese days, businesses with multiple locations need a unified POS system that makes it possible to manage them all from one interface. Through the cloud, you can access your POS software and view information – such as stock levels, sales reports, and staff hours – for all your different locations from anywhere with an internet connection.Integrated Payment ProcessingPayment processors, such as Square, PayPal and Stripe, handle the exchanges between customers and your business. Rather than adding records to your sales book or cash register, you can let an integrated payment processor and POS system do it all for you, in one place. Whenever a customer makes a purchase, the transactional data automatically goes to your POS system, allowing you to view sales figures and generate reports quickly and easily.POS CRM DatabaseIntegrating CRM software with your POS system means you can access all your customer data – e.g. their purchasing history – in one place. With this customer database, you can improve the customer experience by sending personalized marketing campaigns and promotions, or upsell relevant products or services to different customers.Sync Front and Back End systemsUniting your POS with back end systems such as your supply chain or merchandising software is another way to boost efficiency. For instance, you can automate food, beverage, or stock orders so you never run the risk of displaying items on your menu that are actually out of stock. For retail stores, this means you don’t need to worry about calling up your supply chain and reordering bulk items. Installation of a POS SystemThe best POS systems make this very simple. They normally come as ready-out-the-box solutions with the hardware already charged and the software installed – if you’re using the POS company’s hardware, that is.If you’re using your own pre-existing tablet and card reader, then you’ll simply need to follow the POS supplier’s instructions for installing the software. Typically, this involves downloading the software onto your chosen devices and connecting your handheld devices. Once that’s done, you should perform a test by scanning an item to see if the software recognizes the item’s description and price. Mobile POS SystemsMobile POS, or mPOS, is a portable point of sale system used on mobile devices like smartphones and tablets. These flexible systems are ideal for mobile businesses that need to take payments on the go, such as food trucks, home and repair services, market sellers, and pop-up stores. Mobile POS systems can also be taken around restaurants for tableside ordering.With the best mobile POS systems, you can access your company’s primary POS system from your chosen mobile device from anywhere with an internet connection. That said, most POS systems have an offline mode that allows you to take payments without wifi or internet coverage.Mobile or handheld POS systems allow you to make sales on the go Expert VerdictWhat is a POS system? To summarize, it’s a combination of hardware and software designed to help you manage your business more efficiently. These systems enable you to take payments first and foremost, but they can also help you communicate with customers and manage your staff and inventory.You can also use POS systems purely in-store, or integrate one with your ecommerce website in order to maximize your sales volume. You can even use mobile POS systems to help you make sales on the go – ideal for food trucks or pop-up stores. Just think of POS systems as your most valuable business partner yet. Dan Barraclough Dan’s a Senior Writer at Expert Market, specialising in digital marketing, web design, and photocopiers, amongst other topics.