What Is a Point-of-Sale (POS) System and How Does it Work?

Inventory management is an important feature of a comprehensive POS system. After each successful sales transaction, the POS automatically updates the inventory to ensure that a particular item is sold. Retailers can access this information in the backend and ensure that the stock is replenished as and when required. This helps avoid issues related to under-stocking and overstocking. Most importantly, purchase orders are processed quickly and delivered to the customer on time.

CRM functionality is an absolute must in a POS system. During checkout, important customer information such as billing address, payment details, and purchase-related information is stored. This helps later when customers request returns and refunds and also when they seek after-sales support. In some cases, this information also saves you from false chargeback claims, also known as friendly fraud. In addition, a POS with CRM generates richer insights that provide a clearer picture of each customer. This helps to personalize marketing communication and provide more meaningful customer support.

Employee management helps you perform basic HR tasks such as creating and updating employee profiles at the store level. Most importantly, you can grant or remove access to various features of a POS system. It also helps employees to clock in and clock out and mark their attendance. Store managers can monitor how each team member performs and encourage them to be more productive.

A POS system collects different kinds of data, starting from customer information to product-related data. In addition, it also gathers valuable information related to sales, returns, and success of loyalty programs. Many POS systems are equipped with predictive analytics, which help generate meaningful insights and reports. These smart insights can be used to make informed decisions that help drive more sales and enhance revenue figures.

A POS system collects confidential and private information about customers. Stringent guidelines regarding data protection and safeguarding customer privacy require a POS system that offers security and compliance with regulations as a standard feature. Some regulations you must be aware of include the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). Choose a POS system that offers encrypted transactions, fraud detection, regular software updates, and secure user authentication.

Lastly, ensure that the POS you choose offers pricing and discount management. Depending on insights derived from inventory management, you will need to offer discounts to clear stock. You must also implement loyalty programs and reward points to nurture and sustain existing customers. Choose a POS that helps you implement customized discounts and loyalty programs quickly and easily. Most importantly, ensure that all this data is centralized so that the exact prices and deals are visible across all your physical stores and online touchpoints.

The POS monitor displays important information necessary for cashiers and other staff to complete sales. In a basic standalone POS, a desktop computer or laptop is connected to the POS terminal. Advanced POS systems may use the desktop or laptop monitors to display information while a connected and dedicated device is used to swipe cards. In other situations, smartphones and tablets double up as both terminals and monitors. Kiosk POS systems use a large dedicated screen as the monitor. While desktops, laptops, and tablets support elaborate functionalities, smartphones are capable of most POS functionalities despite their small screen size.

EMV cards (short for “Europay, Mastercard, and Visa”) are successors of magnetic stripe cards. They are recognized and accepted by advanced payment terminals and POS systems. However, if you use a standalone POS system or an older card reader, EMV cards may not be supported. In such situations, you will need an EMV-compliant credit reader, which uses chip technology for enhanced payment security.

Although most people have switched to using cards and digital wallets, cash is still in vogue. Market trends show that people continue to use cash to purchase items at brick-and-mortar stores. If you have a physical store, it is paramount to include a cash drawer as part of your POS ecosystem. A cash drawer helps you store cash safely and securely while allowing you to sort out currency notes accurately based on their denominations. Certain advanced cash drawers open automatically when they receive a message from the computer.

A receipt printer is a device that prints credit card slips, invoices, and payment confirmations. Most people still prefer getting a physical copy of their receipts. Hence, receipt printers are an absolute must for physical stores. You may also need to print receipts and send them with the package if e-commerce is enabled. There are two kinds of receipt printers — thermal and dot-matrix. While thermal printers offer a superior quality of print, they’re expensive. Dot-matrix printers are cheaper, make a lot of noise, and the print quality is average.

Barcode scanners are perfect for large stores with several products in their catalog. A cashier just has to swipe the product across the scanner, and all the details will be entered automatically into the POS system. Barcode scanners are also very helpful in encouraging customer self-checkout. Some of the key advantages of using a barcode scanner include eliminating human errors, saving precious time, and offering customers a shorter wait time during checkout.

A POS software is essential to make the hardware components work. A good POS software has an easy-to-use user interface (UI), and enables enhanced user experience (UX). Make sure to connect all your POS-related hardware to your preferred POS software. This helps ensure that there is connectivity between all the devices and that pertinent data is synced, updated, and stored in real time on a centralized server.