Point of Sale Software

Point of sale (POS) software allows customers to complete the transaction for products or services offered by your business. 

Whether you are running a restaurant, a boutique, a cafe, or a retail store, you need to manage a range of administrative and management tasks. From recording sales transactions and managing inventory to collecting payments and running loyalty programs, each of these operations can be done using POS software.

In addition to generic point of sale software for small businesses, POS software is available in different forms as per the needs of the business.

Types of POS software: 

• Retail

• Restaurant

• Bar

• Fashion

• Inventory - Some providers also integrate POS software with Inventory Management Software.

We’ve prepared this guide to help you select the right POS system for your business. Here is what we’ll cover: 

• What is POS software?

• What is POS software used for? 

• What are typical features of POS software?

• What are the potential issues with POS software?

• What are the trends in POS software?

• What is the cost of POS software?

• How do small and midsize businesses use POS software?

What is POS software?

POS software is designed to help businesses accept customer payments for the purchases they make. It is a combination of software as well as hardware components that help businesses manage sales transactions. This tool also assists with operational processes including inventory, customer, staff, and employee management. 

POS software is generally purchased with compatible hardware and accessories such as a monitor screen, barcode scanner, card reader, receipt printer, and cash register. The system is usually installed near the check-in or check-out gate of a retail store.

What is POS software used for?

POS software can help businesses in various ways such as accepting payments, tracking sales, invoicing, recording customer information, and making informed business decisions based on recorded data. Today, it can be difficult for businesses to survive in a competitive market, deploying advanced tools can give you an edge to stay ahead of your competition. 

Let’s discuss a few examples of how your business can benefit from deploying a POS tool:

• To manage inventory: A modern POS solution can take care of your inventory management needs by tracking inventory levels, sales, deliveries, and orders in real time. The POS system can handle multiple stock inventories for more than one store and allow businesses to track stock. The POS system automates inventory counting, reordering, low-stock alerting, and purchase order generating.

• To record key metrics: A POS system records all transactions which helps businesses pull reports and provide an overview of business performance. Businesses can track multiple metrics including average transaction value, items per purchase, conversion rate, cart abandon rate, sales per category, and more. For instance, with a sales report, common sales trends and areas of unnecessary overspend can be identified.

• To track employee schedules: POS software has the ability to view employee-specific information. It can be used to capture employee clock-in/clock-out data so you can see employees’ schedules and time-off. This data can be used as a way to motivate, engage, and develop your team. Other features include commission tracking, goal-setting, payroll management, tip management, employee reports, scheduling, and benefits administration.

Key questions to ask your POS vendor before you buy: 

• How is this tool going to benefit my business? 

• What components can it take care of?

What are typical features of POS software?

A POS system includes both software and hardware components: Hardware components include register screens, barcode scanners, card readers, receipt printers, and cash drawers. POS software also helps run the POS hardware as it integrates with other applications such as inventory management or customer relationship management (CRM) software.

Key POS features include:

Reporting and analytics: Reports and sales analysis help retailers track fast-moving products, products selling at the very best and lowest margins, average transaction volume, advertisement returns, and other metrics. 

Inventory management: Inventory management helps businesses track inventory in real-time by integrating customer purchases with business orders. The system is also capable of alerting low stock levels, taking into consideration the supplier lead time dictated by the back-end algorithm.

Customer management: POS software offers features to automatically collect and store customer profiles such as name, contact details, loyalty points, preferences, and more. Once this information is stored, customer details can be readily pulled when they attempt to complete a purchase.

Payment processing: Payment processing is at the heart of a POS system and it is indispensable that it supports a variety of payment methods including credit cards, e-wallets, net banking, and cash transactions.

Employee management: Some POS systems also help you manage employee productivity using built-in time clocks, scheduling capability, and employee sales data. It will not only help you measure employee performance but also assist with payroll calculations.

Barcode scanning: The POS software can scan and read barcodes on different products and identifies the right prices and discounts that must be added to customer bills.

Key questions to ask your POS vendor before you buy: 

• Does your POS software work on all brands of POS hardware? 

• What other unique value can your tool offer my business?

What are the potential issues with POS software?

Although modern POS software is equipped with advanced technology and is capable of taking care of all your business needs, some interruptions may occur. Let’s look at a few issues you may face:

Security issues: One of the biggest challenges is the potential for cyberattacks because a POS software doesn’t have proper encryption, leaving the tool vulnerable to hackers who can steal sensitive customer data such as credit card information. It is important to purchase a POS system that has hacker detection features, offers secure credit card terminals, and POS endpoints. 

Solution: Security issues can be addressed by data encryption, multi-factor authentication methods, user controls, and consolidated remote access solutions.

Choosing the wrong POS for your business: Selecting the wrong POS provider could have huge ramifications for your business. Smaller businesses, for example, that use a cloud-based POS application might encounter limits on the number of transactions per month. Therefore, it is necessary that you ask certain questions before making a purchase decision.

Solution: Choose a POS provider to match your business needs by asking these questions:

• What kind of support does the system offer?

• How many devices and locations does your software support?

• What bank is the merchant tied to?

• Is it compatible with all devices used by your business?

Integration capabilities: Sometimes the POS solution you purchase doesn’t integrate with your pre-existing applications such as inventory management, customer relationship management (CRM) software, accounting software, eCommerce software, or payment processing software. When you invest in a POS solution, you want it to work with other tools, deeming it important to check with the vendor about available integrations.

Key questions to ask your POS vendor before you buy: 

• How is your tool secure?

• Is your tool available to connect with the other in-house applications that I use?

• What other unique value can your tool offer my business?

What are the trends in POS software?

With the ever-evolving technology space, POS software vendors are adding capabilities like data analytics and artificial intelligence (AI) to derive more customer insights and to make the platform automated. POS software is also evolving to meet the new forms of payments such as e-wallets, P2P, cryptocurrency, and more. 

Here we discuss major POS software trends:

• Mobile payments on the rise: Businesses are coming up with digital payment choices as customers are increasingly using more mobile wallets. The transaction value of the global payment technology market is expected to grow from $5.44 trillion in 2020 to $11.29 billion by 2026 which is pushing vendors to add wallet transaction functionality to their systems. 

• Artificial intelligence (AI) is upgrading POS systems: AI-enabled POS software can capture data about customers, sales, modes of payment, etc. and provide useful insights into what customers are buying. In addition to recommending items to customers and reminding them of unbilled items, an AI-enabled POS system can perform actions such as sending emails automatically, recognizing/translating speech, and making smarter marketing decisions.

• Rise of POS Data Analytics: POS software can give you a peek into data such as customer purchase history, preferences, foot traffic, and transaction volume. POS software with data analytics can help you generate business insights such as your best selling products, less popular products, peak sales hours, and spot seasonal trends in customer purchases.

Key question to ask your POS vendor: 

• Which new technologies do you have and which ones are you planning to incorporate in your product?

• Does your software support the latest POS capabilities such as mobility, data analytics, and AI?

What is the cost of POS software?

There are many free POS and open-source POS software options available on the market but most products are priced on a “per month” basis and can be divided into three pricing tiers based on their starting price.

Price ranges*:

• $25 - $34

• $34 - $78

• $78+

This list summarizes pricing for the base plans of most products. An enterprise, or premium product that is priced higher, may include some additional features such as multi-store retail management, advanced inventory reporting, customer loyalty management, advanced sales, promotional events management, and mobile apps.

Key questions to ask your POS vendor before you buy: 

• What is the pricing model of the product? 

• In addition to the subscription fee, what other costs are associated if I invest in your software? 

• Does your software vendor offer a free plan, free trial, and demo? 

How do small and midsize businesses use POS software?

There are different types of POS system software available on the market that cater to different types of businesses and sizes. Availability of a broad range of POS software makes it important that you identify your business needs and invest in the solution that works for you. Here are some examples of how small and medium businesses are using POS software: 

• A single retail store business owner, or an operator who does pop-up events, would likely use a basic retail POS system with limited hardware and advanced features. But if you operate up to five stores, you're best suited for a POS solution that enables multiple location management, advanced reporting and analytics.

• Similarly, if you are an owner of a small retail business with just one cash register, you might opt for an on-premise point of sale system. Since yours is a small retail operation, you can purchase, install, and host the software on your own computer system. In addition, you will be in a good position to purchase or lease your own payment processor and POS hardware, like a cash drawer or a barcode scanner.  

• On the other hand, if you are a restaurant operating in multiple locations with numerous point of sale terminals, you could use a cloud-based POS system with a centralized mechanism for payment processing, inventory management, and accounting, so that nothing falls through cracks. The restaurant will still need POS hardware, (such as terminals and tablets), but these systems will all communicate with each other.

*The pricing included is for the entry-level/lowest-priced offering that was found on vendor websites on July 7, 2021. These ranges correspond to the 25th, 75th, and 100th percentile of the pricing information gathered from vendor websites of sample products and exclude freemium plans.

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*Note: The applications selected in this article are examples to show a feature in context, and are not intended as endorsements or recommendations, obtained from sources believed to be reliable at the time of publication.