What is a POS system and how to choose one?

When a shopper is ready to make a purchase, you want to provide a smooth checkout experience — especially when they're in your store with a product in hand.

What is a POS system?

A point of sale (POS) system is a platform businesses use to process and complete customer payments, whether online or in-store.

Before the internet age, the common POS system was a cash register. Now, portable and connected POS terminals, tablets, and monitors are popular alternatives for powering contactless and secure transactions that could as seamlessly as the other apps and devices in shoppers’ lives.

How does a POS system work?

A POS system integrates all your transactions, inventory, and customer data, so you can facilitate sales, gather customer insights, activate special offers and discounts, and manage product inventory all in one place.

When it comes to processing transactions, POS retail systems are key to providing an easy checkout experience. Not only do they enable a range of payment methods, but they also calculate sales tax, log the transaction details (e.g., the date and time), adjust inventory records, and generate a receipt for the customer.

These features make POS systems particularly helpful for restaurants and brick-and-mortar stores. Cafes, for example, can use them to send orders to their kitchens and track popular menu items, while retail shops can use POS systems to build customer databases and sales reports.

Point of sale example

Let's look at a sample scenario: Leo owns a record store called Chairman of the Boards, and he 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 album's price 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 customer's bank authorizes the request, 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.

POS hardware and POS software

A POS system typically consists of both POS hardware and POS software. While every POS system requires software, not all businesses may need dedicated hardware if they opt for cloud-based or mobile POS solutions accessible through smartphones or tablets.

POS hardware: different types

Within a POS system, the primary role of POS hardware is to process transactions. As a result, they typically come in various types, such as:

• POS register: A Wi-Fi-connected POS cash register can help you process transactions, accept different payment methods, and track sales data.
• POS terminals: These portable all-in-one devices not only process different payment methods but also print receipts, accept tips, calculate taxes, and provide refunds.
• Tablets and monitors: Connected devices — like POS tablets and iPads — provide user-friendly, touchscreen interfaces for employees and shoppers while enabling checkout from anywhere in your establishment.
• Credit card readers:  EMV-compliant card reader allows customers to quickly make purchases with the swipe, tap, or chip-enabled credit card securely.
• Receipt printers: For shoppers who prefer printed receipts over emailed receipts, dedicated receipt printers can fulfill their requests.
• Barcode scanners: With a barcode scanner connected to your POS system, a customer or employee can pull product and price information instantly. Advanced barcode scanners will also support specialized scans, such as QR codes, for contactless checkout and redeeming 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 purchases. Connected cash drawers can keep your business's money safe and cash payments organized.

POS software features

Just like your phone or computer, POS systems run on software. Since POS software can sync across devices and share updates in real time, it acts as the nerve center of your business.

Beyond simply processing payments, comprehensive POS software systems can also help manage other aspects of your company, including sales, inventory, and reporting. This ultimately can boost efficiency, accuracy, and overall management.

In-person payment processing

Payment processing is one of the most important features of any POS system. Generally, the payment methods that POS systems can facilitate include the following:

• Credit and debit cards
• Digital wallets such as Google Pay and Apple Pay
• QR codes
• Gift cards
• Cash
• Contactless payments
• Card-not-present transactions, like when you manually enter credit card information
• Online payments through your e-commerce site

Learn more about POS payment processing and how QR code payments work.

Types of POS systems

Given that every business has unique needs, finding the right POS system is imperative. The different types of POS systems include:

• On-premise or traditional POS: Usually fixed to a static location like the checkout counter at the front or back of the shop, they store data on a local server and are updated manually.
• Cloud or mobile POS: Because they connect to other devices using Bluetooth and Wi-Fi, they are portable and can be accessed throughout a retail location or even on the go. They also use cloud-based technology to store data, keeping people and devices connected in real time.
• Tablet-based POS: With tablets as the central device, these POS systems offer a user-friendly interface.
• Online or e-commerce POS: Designed specifically for online businesses, they integrate with websites or online marketplaces to process payments and manage orders.

Top benefits of POS systems

Robust and well-integrated POS systems can take growing businesses to the next level in terms of driving sales and unlocking new growth opportunities — all while providing the tools for managing operations from anywhere.

POS integrations

Modern point-of-sale systems can connect to entire ecosystems of third-party platforms to help businesses sync data and simplify their workflows. With the right integrations, you can also avoid the hassle of learning new software or migrating data.

Common POS integrations include e-commerce, accounting, and inventory management platforms.

Inventory management

Automatically update inventory in real time with your POS system. Some POS inventory management platforms will alert you when stock runs low. You can use this inventory data to reorder best-selling items in advance, helping to ensure you don't run out of your most popular items.

POS data

Your POS system can generate comprehensive sales reports from POS data related to customer activity and transactions, including total sales, cost of items sold, gross margins, and net profits.

With these insights at your fingertips, you can make more informed decisions to fuel small business growth.

Staff management

Use your POS system to set up unique accounts for each employee. This way, staff members can clock in and out from one unified platform.

POS employee management features can also help business owners create schedules and track staff performance.

Tipping with a POS

Make it easy for customers to show their support by providing POS tipping options at checkout. Many POS systems will prompt customers with suggested tip amounts, so they can simply tap and add the extra payment.

A POS tip management feature can also help you track, organize, and distribute employee tips as needed.

Build customer profiles

Create comprehensive customer profiles that store payment and contact information, purchase history, and loyalty status so customers generally only have to share their information once.

You can then use this data 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 online and in-store assistance.

How to choose a POS solution

Choosing the right POS solution depends on the unique needs of your business. Consider a POS solution that supports the following:

• Multiple payment methods for fast, contactless transactions
• Hardware devices like card readers, barcode scanners, and cash drawers
• On-premise and cloud-based payments
• Integrations with third-party platforms
• POS reports of sales, costs, and profits
• Real-time inventory and staff management
• Customer profiles of contact information and purchase history

If you’re shopping for a POS system, PayPal Zettle can help streamline transactions and business operations. Click here to learn more about our complete Point of Sale Solution.