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What is a POS?

By Julie Warshaw, PayPal editorial staff

June 30, 2021

Source: PayPal

Photo Source: Unsplash,

When a shopper is ready to make a purchase, you want to provide the smoothest checkout experience possible–especially when they're in your store with a product in-hand.

That's where a point of sale (POS) system comes in. The moment browsing turns to buying, your POS should be ready to seamlessly process the transaction. Otherwise, you risk frustrating would-be customers and losing revenue. With the right POS system, you can accept a range of payment methods and easily manage your transactions, so you're always in control. Beyond just processing transactions, the right POS solution can also give you insight into your customers and operations, helping you find new, innovative ways to scale your business. Here's a closer look at what you need to know about POS and how to find the best solution for your business needs.

What is POS? Point of sale is an umbrella term for the instant a shopper buys your product or service. In a restaurant, the point of sale might happen at the end of the meal when a diner hands their credit card to the waiter. In a retail store, the POS could be at the checkout counter when a shopper is ready to buy the items in their cart. Online, the POS may take place on a social media channel that includes Buy buttons and shopping capabilities. Or it might happen on a brand's e-commerce website. To be clear, POS is not the same as POP–or point-of-purchase. The POP is the physical location where a customer decides to buy, like the floor of a retail location or the from the chair in a nail salon. The POS refers to exactly when that purchase transaction takes place. Before the internet age, the common POS was a cash register. Now, customers and businesses are using devices with capabilities far beyond basic cash registers. Shoppers expect digitally powered, contactless, and secure transactions that work as smoothly as the other apps and devices in their life.

What is a POS system? A POS system is the platform that businesses use to process and complete customer purchases. While modern POS systems can connect businesses to entire ecosystems of data and services, at their core these systems are typically composed of two major components: hardware and software.

What is POS system hardware? Point of sale hardware comes in a variety of forms and offers different functionalities. These are few of the most common: Tablets and monitors: These devices provide a user-friendly, touchscreen interface for employees and shoppers. A tablet or monitor can be used by customers for confirming the price, adding a tip, and selecting receipt options. Modern POS hardware can provide sleek, minimal, and portable alternatives to the bulky cash registers and monitors of traditional POS systems. They can be housed on a stand at a checkout counter or picked up and used throughout a store or restaurant. Credit card readers: A secure, EMV-compliant card reader allows customers to quickly make purchases with the swipe, tap, or chip-enabled credit card of their choice. Receipt printers: For shoppers who prefer printed receipts over emailed receipts, dedicated receipt printers can fulfill their request. With a receipt in hand, customers can see a rundown of their purchases and keep a paper copy of their transaction. Barcode scanners: With a barcode scanner connected to your POS system, a customer or employee can pull product and price information in an instant. A coffee shop barista can enter the shopper's selection themselves on the POS system monitor. At a market or retail store, on the other hand, shoppers are able to scan their items when they're ready to buy. Advanced barcode scanners will also support specialized scans, such as QR codes, which customers can use for contactless checkout and to redeem special offers. Cash drawers: Customers who don't want to pay digitally or with a credit card should still have a fast, secure option for making their purchase. Connected cash drawers can keep your business's money safe and cash payments organized. By syncing a cash drawer with your POS system, you're able to track your cash transactions by generating data each time the drawer opens and closes.

What is POS system software? Integral to any point of sale system, software like apps and mobile programs are what run the actual POS system by communicating between devices through WiFi and Bluetooth. Businesses can sync and upload products, prices, and payment options. Advanced POS software is even able to perform operational functions, like generating automatic sales reports and tracking inventory, as well as offering added security features to help manage risk. This type of software integrates easily with third-party platforms that handle other business processes, so you can stick with programs you’re already using. For example, an e-commerce business that runs on the BigCommerce platform and uses QuickBooks, can integrate BigCommerce and QuickBooks into it its POS.

What is a point of sale system? Let's make things simple by creating a scenario where we can see the actions taken by the entire POS system to process a transaction: Leo owns a record store called Chairman of the Boards that uses a tablet POS system with advanced software. A shopper approaches the checkout counter to buy an album using her credit card. Here's how the POS system would work, from start to finish.

  • A sales associate scans or selects the specific album on the store's POS-enabled tablet.

  • The system software pulls up the price of the album and adds sales tax, displaying the total amount owed.

  • The customer swipes her credit card through the card reader hardware, which uses software to send a payment request from the Chairman of the Boards to her bank.

  • The request is authorized by the customer's bank and the record store's POS system processes the payment.

  • With payment received, Leo's POS software automatically updates his inventory data to show that a unit of that item was sold.

  • The customer chooses to receive a digital copy of her receipt and provides her email address.

  • The POS system emails the customer her receipt and the transaction is completed.

What are point of sale payments? While cash registers are often limited to cash-only purchases, POS systems can support multiple point of sale payment methods. This way, customers can avoid having to fish around in their wallet for bills or, worse, running to the ATM down the street. The right POS for your business can make the sale without any hiccups. These are just a few types of payments modern POS systems can process:

  • Credit and debit cards

  • Digital wallet

  • QR codes

  • Gift cards

  • Cash

What can a POS system do beyond accepting payments? A lot, as it turns out. These comprehensive platforms can act as the digital heart of a business, becoming a one-stop shop for management, administration, and productivity. Here's what small businesses can do from a connected POS system: Generate sales reports. Your POS systems should be able to automatically produce sales reports based on your transaction data. At a glance, you'll be able to view a range of metrics, including total sales, cost of items sold, gross margins, and net profits. Update inventory in real-time. You can have each POS purchase result in an automatic update to your inventory data, so you'll be alerted when stock is running low. You can also use this data to reorder best sellers in advance, helping to ensure you don't run out of your most popular items. Enable easy shipping and returns. Shoppers might want to buy products online and pick up in-store. Or they might buy in-store and have products shipped to their home. And the same goes for returns or exchanges. With a connected POS system that stores receipts digitally, you can easily accommodate a customer's request. Build customer profiles. Create comprehensive shopper profiles that store payment and contact information, purchase history, and loyalty status, so customers only have to share their information once. This data can be used to launch personalized marketing campaigns and distribute special offers based on each customer's interests and preferences. Sales associates and customer service representatives can also access this information to deliver more personalized assistance both online and in-store. Manage staff. Add unique accounts for each employee, allowing them to clock in and out through the POS system.

What is a POS system best for? It's reasonable to assume that a modern POS would benefit most businesses in one way or another, but which function is most beneficial might depend on the industry. Here are just some of the ways different industries utilize their POS system's capabilities. Food and beverage: Restaurants, cafes, pizza shops, and bakeries can all use POS systems to send orders to their kitchens. They can also track things like what items are most often purchased together and create new marketing around those products. Nightlife: Bars and nightclubs use POS systems to streamline the payment process in crowded areas, so a customer can pay without having to go to a checkout counter. Retail: Major retailers and boutique stores can use POS systems to build customer databases, manage gift registries, and generate sales reports. It's important to note that POS systems can be valuable for businesses of all sizes. Small businesses, in particular, can benefit from full-service POS systems to help track purchases on one, simple platform. As they're growing their brands, small business owners can use the system to gather customer insights, activate special offers and discounts, and manage product inventory.

What is a mobile POS system? The POS systems that use Bluetooth and Wi-Fi to connect are considered mobile, even when they’re being used in a physical location. Since mobile POS systems operate across wireless devices, like smartphones and tablets, they can be accessed throughout a retail location or even on-the-go. Traditional POS systems, on the other hand, are commonly fixed to a static location, like the checkout counter at the front or back of the shop. Think of an electronics store, for example. Customers interacting with displayed smartphones and other tech can be helped by a store employee and even make a purchase, right where they’re standing. That's made possible by a mobile POS system. Mobile POS systems can also be particularly useful for restaurants, where servers can accept payment methods from each diner's table. Mobile POS systems use cloud-based technology to store data, keeping people and devices connected in real-time. This means that anyone using a connected device will have up-to-date inventory and customer information. Plus, mobile POS system software can update automatically, so it's always running on the most current version. On the other hand, most traditional POS systems store data on a local server, often located at the business itself. This can require more physical and digital bandwidth, which may eat into profits. And since traditional POS systems aren't connected to a cloud, they have to be updated manually and don't scale well as your business grows. Mobile, cloud-based POS systems are also more cost-effective than traditional POS systems. The latter often come with sizeable licensing fees, expensive hardware, and costly maintenance and updates. A single piece of traditional POS hardware, for example, can run business owners thousands of dollars upfront. A suite of cloud-based POS hardware, on the other hand, can be rented for less than $100 a month.

Is a point of sale system secure? POS systems should include security features that protect your business and customers from fraudulent transactions and privacy breaches. Just like an online marketplace has the tools to verify payment methods and personal data, your in-store points of sale should too. Your POS system should have encryption capabilities that protect customer information and prevent device tampering. Even if you accept cash, a system-connected cash drawer can keep a digital record of when the drawer opens and how much money is exchanged, so you minimize the risk of lost money and human error. Encrypted POS hardware can also prevent unauthorized parties from accessing your payment system, stealing funds, or leaking sensitive information.

What is POS pricing and fees? The price of a POS system varies. When you choose a point of sale system, you’re paying for access to its entire payments ecosystem. Zettle, the POS solution from PayPal, provides businesses with the benefits and services of the PayPal platform. The cost for a POS comes down to two primary components: hardware and software. Hardware can either be purchased or leased, and you can often choose to have the software included as a package for an additional cost. A la carte software programs are typically available for either a flat fee or require a subscription and regular payments. Subscription plans might also be tiered, with basic, premium, and enterprise options. Pricing also depends on your business's size and POS system needs. A business with two card readers will likely end up spending less than a business with multiple card readers, barcode scanners, and cash registers. It's important to find a system with straightforward and transparent pricing. Watch out for hidden charges, like fees for device activation, software download, and even fees for accepting select payment methods. Some POS solutions may also include lock-in contracts that mean you're committed to one system for a predetermined length of time.

What POS works with my current programs? Modern point-of-sale systems can connect to entire ecosystems of third-party platforms to help businesses sync data across channels. That means that business owners can often find a POS integration of the platforms and programs they were already using. Here are two common third-party POS integrations: E-commerce platforms: Connect your POS system to your online marketplace, so you can seamlessly combine data from e-commerce and in-person sales. This can help you track inventory, and compare sales trends and shopper behaviors on each channel. Accounting programs: Automatically sending POS data to your accounting services can help you save time when preparing your business taxes and stay on track with your financial goals. By choosing a POS system with familiar programs already integrated, you can avoid the hassle of learning new software or having to migrate massive amounts of data.

What should I look for in a POS system? That depends on the unique needs of your business. Your POS system can be a one-stop-shop for accepting payments online and offline, managing customer interactions, and connecting to the most important parts of your company. There's a lot to consider. Based on what we've covered, here's a checklist of things to look for:

  • A range of acceptable payment methods for fast, contactless transactions

  • A customizable suite of device options for multiple points of sale

  • Additional services beyond POS, such as inventory management

  • Mobile and cloud-based capabilities

  • Easy, self-service setup, maintenance, and updates

  • Security features and data encryption

  • Unique logins for employees so they can quickly switch accounts between shifts

  • Third-party integrations, like accounting and e-commerce platforms

  • Transparent pricing and no hidden fees

PayPal Zettle, the comprehensive point of sale solution from PayPal, equips businesses with all of the aboveand more. PayPal Zettle can help you streamline your transactions and business operations. Plus, you can offer the payment options your shoppers prefer, including credit cards, QR codes, cash, and gift cards. Since PayPal Zettle is also part of the PayPal network, you can manage all online and offline payments from a single PayPal Business account. And you can tap into a whole network of personalized services and trusted partners – providing even more support as you grow your business and engage new shoppers. The contents of this site are provided for informational purposes only. You should always obtain independent, professional accounting, financial, and legal advice before making any business decision.

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