The Basics of a Point of Sale (POS) System

Point of sale (POS) can be referred to as check-out or cash wrap and is usually the place in a store or restaurant where transactions for the exchange of goods and services take place. A point of sale system typically refers to the physical electronic hardware and peripherals used to complete a transaction. This hardware can include a cash register, a dedicated computer, or even a mobile smart device like a tablet computer. Value Added Resellers (VAR) use the term POS interchangeably when talking about the hardware and checkout location. The credit card industry adds to the confusion. Merchant service providers that process credit card transactions and their independent sales organizations (ISOs) also refer to standalone credit card terminals as POS. A POS in this sense is just the peripheral that reads the credit card, sends the transaction data between the store and the credit card processor, and can issue a receipt once approved.

The first POS hardware was a mechanical cash register invented in 1879 by a Dayton saloon owner named James Ritty. The purpose was to keep employees and customers honest. It’s hard to find a mechanical cash register these days; Most POS systems are electronic, meaning they use an electronic cash register or computer system. Electronic POS is sometimes referred to as ePOS. Electronic cash registers help streamline some of the day-end bills that store owners must process on a daily basis. Realistically, they’re only used in stores that aren’t automated, need a backup system, or don’t process many transactions on a daily basis.

The POS system is hardware that is combined with POS software and peripheral devices. This hardware helps a store clerk or employee manage the sales process. At a basic level, the POS software manages the transaction calculations. However, POS software is quite scalable and modules for accounting, inventory and even customer relationship management (CRM) can be added. Inexpensive software options are available that can give a small store owner some of the tools that the large Fortune 500 retailers use.

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POS peripherals are devices such as:

receipt printer

Provide a physical record of the transaction

Magnetic Stripe Reader (MSR)

Automate the entry of credit card, driver’s license or loyalty card information

Barcode scanner

Automate the entry of information on products, loyalty cards and coupons. This information is referenced in Universal Product Codes (UPC) and Quick Response (QR Codes).

cash drawer

A drawer connected to the POS for safe storage of cash and coins.

POS keyboard

Typically, a hardened retail keyboard is built to withstand constant use in a retail environment and is used to enter customer, product, or service data. The MSR is often installed. Many large stores use mechanical keyboards, which are designed to take a heavier load than a standard consumer keyboard.

signature capture

Used to store an electronic record of a customer’s signature

electronic scales

Automatic data entry of weight information

computer display

Used as a computer screen to display information. May have touchscreen technology.

Typically, large companies have designed or customized the hardware, software, and peripherals to fit their specific needs. The goal is to process transactions in the fastest and most accurate way possible to keep their customers happy, trainable employees and keep accounting accurate.

Small and medium-sized businesses (SMB retailers) typically buy off-the-shelf hardware bundles with software tailored to their industry. Today, this software no longer needs to reside on a computer in the store, it can be hosted in a cloud and sold under the software-as-a-service (SaaS) model.

Mobile POS are now available which prevent POS users from being tied to a specific location in a store. Mobile POS devices allow some or all of the functionality of both the hardware and software found in a traditional point of sale system on a device that fits in the user’s hand.

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POS systems have come a long way since 1879 and will continue to change, adding both features and benefits. In the end, they will continue to help store and restaurant owners manage and measure their performance, make routine tasks easier, and increase customer satisfaction.