What is a POS System and How Does a Point of Sale System Work?

Retail shops are available all sizes and styles, but when there’s one factor each store wants, it’s a strong point of sale (POS) system. 

The POS performs a key function in any retailer’s day-to-day operations, because it drives your complete checkout course of. You employ your level of sale system to ring up gross sales, acquire funds and make sure that transactions are processed effectively. 

However how does a POS system work, precisely? 

On this publish, we’ll take a look at the inside workings of level of sale methods and make clear how they work. You’ll study the steps concerned within the checkout course of, in addition to the function that POS options play in managing a retail retailer’s again workplace operations. 

Let’s get began. 

What’s a POS system? 

Some extent of sale system (typically known as a “POS machine”) is the system you employ to facilitate in-store gross sales. It additionally serves as your record-keeping answer for transactions, enabling you to trace your income, stock, prospects and extra. 

POS methods can are available varied kinds. Some retailers might use a pc, together with further {hardware} corresponding to receipt printers and money drawers (extra on this under). Others merely use a cellular gadget—corresponding to an iPad—as their POS.

The proper setup depends upon your wants and the checkout expertise you need to present.

What are the totally different components of a POS system?

To raised perceive how a POS system works, we first want to debate the totally different elements a degree of sale methods can have. These options are typically manufactured from two key components: software program and {hardware}.

POS software program

POS software program is this system or software that executes the assorted capabilities required on the level of sale. On the most simple stage, POS software program allows you to calculate transaction quantities, observe gross sales and monitor stock. 

Different POS options have extra superior choices. Lightspeed, as an illustration, has built-in loyalty features, subtle reporting capabilities and ecommerce functionalities.

POS {hardware} 

Hardware contains the bodily elements of your level of sale system. Consider {hardware} because the physique of your POS, whereas software program is the thoughts. Under are the most typical {hardware} used with a POS system. 

POS terminal – That is the gadget on which the POS software program runs. It may be a desktop laptop, laptop computer or cellular gadget (e.g, smartphone or pill). Some POS suppliers might provide specially-designed {hardware} that works with their proprietary software program. 

Card reader – In the event you settle for bank card funds (and also you completely ought to), you want a bank card reader to facilitate the fee processes. The kind of bank card machine you want will rely in your level of sale software program and terminal. Talk about your choices along with your supplier to make sure you’re utilizing card readers which might be appropriate with their answer. 

Barcode scanner – Superb for shops which have a big catalog, a barcode scanner saves you time from having to manually sort or seek for merchandise. Simply scan the barcode and your POS will routinely add the product to the transaction. 

Receipt printer – In the event you present bodily receipts to consumers, then you definitely want a tool to print these receipts. That is the place the receipt printer is available in. When linked along with your POS system, the printer will routinely produce a receipt when the transaction is full. 

Money drawer – This gadget primarily holds money, so you possibly can cater to prospects preferring this fee technique. Your money drawer shops money so you possibly can acquire funds and dispense change when needed. 

How does a POS system work? 

We simply coated the totally different elements of a degree of sale answer; now, let’s take a look at how all of them come collectively. Right here’s a step-by-step strategy of how a POS system works.

How a POS system works when ringing up gross sales

Level of sale methods are most seen in the course of the checkout course of, which usually includes the next steps.

1. File the gadgets being bought. First, the shopper presents the gadgets they need to buy to the cashier. This normally signifies that the patron brings the merchandise to the checkout space, although some retailers can implement the checkout course of on the gross sales ground.

From there, you (or your cashier) would file the gadgets and portions being bought by scanning them into the POS (if there’s a barcode scanner). In the event you’re utilizing a cellular POS or are transacting on the go (like at an occasion), then recording the merchandise may imply typing it into the purpose of sale software program. 

The software program will then file the acquisition information (merchandise identify, amount, and many others.) and show the information on the display screen.

2. Gather and course of fee. As soon as all gadgets have been added to the sale, the cashier initiates the fee course of by clicking or tapping the suitable button on the POS show.

At this level, they’d ask how the shopper wish to pay. In the event that they’re paying in money, then the cashier would merely take the fee, open the money drawer, put the money inside and hand the shopper their change (if wanted).

If the shopper is utilizing a bank card then the cashier would choose that fee technique within the POS and immediate the shopper to swipe, dip or faucet their card utilizing the bank card reader. The method is similar for cellular funds, however as a substitute of utilizing a bodily card, the shopper should hover their cellphone over the bank card terminal.

The cardboard reader connects and interfaces with the POS system to securely acquire the fee and course of the transaction*. 

*Be aware: in case your POS system is built-in along with your funds answer, then accepting funds will likely be a seamless course of. As soon as the fee gadget “reads” the purchasers’ bank card, it routinely sends the transaction particulars to your POS, so the sale might be accomplished with out guide work from the cashier. 

Nevertheless, in case you’re utilizing a non-integrated answer, then your cashier should manually enter the fee quantity into the purpose of sale software program earlier than finishing the transaction. 

Evidently, choosing integrated payments presents a way more favorable expertise for each your group and your prospects. When your POS and fee terminals are in a position to “speak” to one another, there’s no want for guide information entry, which suggests fewer errors and quicker transactions.

3. Generate a receipt. As soon as the fee is authorized, the POS system completes the sale and generates a receipt. Relying in your setup, this might contain printing a bodily receipt or prompting the shopper to enter their e-mail or cellphone quantity to allow them to simply have a digital copy.

4. Provide loyalty factors and rewards [optional]. That is a further step that takes place in retail shops that supply loyalty packages.

In the event you reward consumers for his or her buy, then your checkout course of would contain a loyalty element, wherein you ask prospects to offer their particulars. This could possibly be their e-mail, cellphone quantity, birthday, or no matter information you employ to trace your loyalty program members. 

As for when this step takes place, that depends upon your POS setup. Usually, loyalty factors are recorded when the sale has been authorized and earlier than portray the receipt.

How a POS system works within the again workplace

The POS system is definitely a essential a part of the checkout course of, however let’s not overlook that it additionally performs an equally necessary function within the again workplace. 

Whereas the entire steps we outlined above occur on the checkout counter, there are some important capabilities which might be happening behind the scenes. They embrace:

Updating stock ranges. As gadgets are added to the sale, your POS system is busy monitoring and recording these portions within the background, and it updates your catalog accordingly. 

So, if the shopper purchases three pairs of socks, then your POS will replace the amount of that merchandise so that you at all times have an correct file of what you might have on-hand. 

Relying on how your POS system works, it could additionally immediate you to reorder sure gadgets if portions fall under a sure threshold. 

Recording income information. Your level of sale software program also can file all transactional information that goes by way of the system. This contains gross sales, funds, returns and extra. The software program tallies and organizes all that information, and in some circumstances can show them in a dashboard for straightforward reference. 

In case your level of sale answer is linked to your accounting software program, then your POS also can sync monetary information that will help you keep on high of your books. 

Updating buyer information. In the event you acquire and observe shopper information, your POS system can maintain the whole lot in examine. This contains recording your prospects’ contact information, buy historical past, accrued loyalty factors and extra. 

The entire above allows you to make smarter choices, empowering you to run your enterprise extra effectively. Most POS methods have reporting capabilities that permit you observe key metrics and have a deal with on enterprise efficiency always. 

As you possibly can see, the function of your POS goes past merely ringing up gross sales. The proper system retains your operations operating easily and helps you and your group make smarter enterprise choices. 

Subsequent steps: studying and getting essentially the most out of your POS system

Now that you’ve a greater understanding of how POS methods work, it’s time to place that data to good use. The subsequent steps to take will depend upon the present methods you might have in place. 

Be sure to have a strong POS in your enterprise

For starters, see to it that you just’re utilizing a degree of sale system that meets your wants. Take into account your present processes—together with the checkout expertise, stock administration and reporting—and discover a POS answer that helps your enterprise workflows. 

Let’s say you want an answer that accepts cellular funds. On this case, you must set your sights on a POS that’s appropriate with the fitting bank card terminals. 

You also needs to take into consideration your again workplace and operations. Do you might have all the information it’s good to make knowledgeable choices in relation to stock and gross sales? Can you combine the totally different transferring components of your enterprise?

The solutions to those questions will make clear the capabilities you want in a degree of sale system, so you’ll find the very best answer for you. 

Practice your group

Have already got a POS system you like? Make sure you and your group absolutely perceive its capabilities so you possibly can put the system into good use. Listed below are some recommendations on just do that.

Get coaching and assist out of your POS vendor. See in case your level of sale supplier presents coaching classes that will help you and your group study the system. These classes are notably helpful if you’re beginning out with the POS system, as they’ll assist get conversant in its options and the way they apply to your particular enterprise. 

Lightspeed, for instance, presents premium onboarding, account administration and different companies that will help you get essentially the most out of the software program. Lightspeed additionally gives 24/7 assist so you may get in contact with us at any time of the day or night time. 

Faucet into your supplier’s assets. Most POS firms present support articles, step-by-step guides and other resources that will help you study the answer’s options and capabilities. In the event you choose to peruse info at your individual tempo, then maintain these paperwork useful so you possibly can reference them when wanted.

Hold your up to date with new options and developments. POS answer suppliers repeatedly put out new options and releases to enhance the efficiency of the system. Hold an eye fixed out for these updates. That approach, when a helpful characteristic comes out, you’ll be capable to benefit from it ASAP.

Integrating your POS methods with different enterprise instruments

Wish to stage up how your POS system works? Join it with the opposite apps and software program in your enterprise. Listed below are just a few concepts. 

POS and accounting software program integration

Connecting your POS system and accounting software program generally is a highly effective mixture, as a result of it lets you floor and handle monetary information effectively. 

Reconciling bills is a breeze and tax season turns into simpler. As an illustration, with Lightspeed’s integration with Xero, cost-of-goods-sold (COGS) publish to Xero and are tracked as you promote your merchandise. You may view your profitability in opposition to your wages, hire, advertising and different bills to know your true efficiency.

POS and ERP integration

If you wish to streamline your enterprise operations and decision-making processes, combine your POS along with your enterprise useful resource planning (ERP) system.

Notably helpful for bigger enterprises, the mixture of your POS and ERP may help you sync product, buyer and monetary information, so you can also make knowledgeable choices shortly. A sturdy POS + ERP integration additionally facilitates real-time information evaluation, stock administration and monetary reporting.

Take into account the case of Imagine Exhibitions, which built-in Lightspeed with NetSuite to make sure all the required retail information flows easily between the 2 methods.

“We’re pretty well-integrated. We’re stay on our POS so we now have info updating instantly. Our patrons know the promote by way of ratios and ship to gross sales numbers immediately. We’re in a position to react actually, actually properly,” remarks Michael Slagle, Vice President of Retail Operations at Think about Exhibitions.

“I really like the truth that anyplace I’m at on my laptop computer, I can pull up and see instantaneous gross sales. I can simply view how our places are doing at any time. I really like the truth that if we go into NetSuite and we enter a PO, we will ship it to Lightspeed immediately.”

POS and ecommerce integration

Reality: consumers as we speak choose omnichannel retail—that means, they need to store at shops that allow them to browse and purchase throughout a number of channels. It’s not unusual for a buyer to do analysis on-line, buy one thing on their cellphone and in the end pick-up the merchandise by going in-store. 

With the intention to facilitate omnichannel buying journeys, it’s good to make sure that your POS and ecommerce platform are tightly built-in. Merchandise, orders and gross sales ought to sync between the 2 options to make sure that any merchandise mirrored on-line or in-store are literally accessible and also you don’t find yourself overselling merchandise. 

Another choice is to make use of one platform for each your bodily and digital retail shops. That approach, you possibly can handle each on-line and offline orders from a single system, lowering complexity in your operations. 

Advantages of utilizing a POS system

When you’ve mastered the in and outs of work your POS system, your enterprise will see large advantages within the type of: 

Quicker checkout

A very good POS system makes checkout quicker and simpler for each your cashiers and prospects. With the fitting answer, workers can dedicate extra power in the direction of connecting with consumers, quite than coping with tech points.

A system like Lightspeed additionally hurries up the method of ringing up gross sales, which ends up in a greater buyer expertise and a smoother move of in-store visitors. 

Take for instance, Brandini Toffee which makes use of Lightspeed to create a streamlined checkout expertise. 

“Processing transactions for us actually takes underneath a minute… We course of these gadgets, course of funds, and get by way of checkout swiftly,” says Brandon Weimer, Proprietor at Brandini Toffee. 

Higher visibility into your enterprise efficiency

Most trendy, cloud-based POS methods have built-in information and analytics, so you possibly can generate stories on varied areas of your enterprise—together with stock, gross sales, workers and prospects. 

POS reporting generally is a game-changer. Keep in mind: data is energy. If you understand what your high sellers are, for instance, you possibly can optimize your stock to extend profitability and reduce overstock. 

Or, if you wish to make sure that your retailer is staffed with the fitting variety of workers at any given time, you possibly can merely modify your staffing ranges based mostly on gross sales per hour. 

Having visibility into your retail information additionally results in smarter advertising choices so you possibly can purchase and retain extra prospects. Simply ask Wilfredo Rodriguez, CFO of Sunmed, which has a number of CBD shops throughout america. 

“With out the Lightspeed platform enabling [data collection] for us, not one of the buyer engagement and training that we’ve been in a position to accomplish by way of e-mail advertising over the previous six months would have been attainable.”

He continues, “Utilizing the Lightspeed API, we’ve been in a position to get full visibility into what’s going on in each one in every of our Lightspeed places, proper on the transactional stage. And so not solely does it present me with that perception, but it surely additionally permits us to pump that information into our e-mail advertising platform in order that we will start speaking with our shopper immediately.”

A stronger deal with in your stock

As a retailer, stock—i.e., bodily items—are your bread and butter. That’s why it’s essential to have a system in place that allows you to observe and handle your inventory. 

Luckily, you probably have the fitting POS system, staying on high of stock administration is completely doable. 

Select a POS answer with stock administration capabilities together with:

• Including merchandise individually or in bulk
• Ordering and receiving merchandise
• Stock counts
• Stock stories

These capabilities allow you to streamline your stock administration, scale back errors and optimize inventory ranges for optimum effectivity and gross sales.

Take for instance, the reward store Metropolis Chook in Detroit. In accordance with Founder Emily Linn, having an excellent POS and stock administration platform (i.e., Lightspeed), has simplified and accelerated their stock administration processes.

“The inventory management characteristic in Lightspeed has actually revolutionized our purchasing. We used to make use of spreadsheets with difficult equations to see what we wanted to reorder and it might take hours. And utilizing that operate, which auto generates quantities we have to reorder with, with numbers that you just set, has allowed us to create preorders of merchandise which might be promoting effectively and ship them in in minutes,” Emily explains. 

Remaining phrases

Whether or not you’re new to how POS methods work or you have already got one thing in place, however need to discover a higher answer, Lightspeed may help. A one-stop commerce platform that’s constructed for retailers, Lightspeed presents level of sale, ecommerce, stock and reporting options to maintain your enterprise operating easily. 

Talk to a retail expert today and uncover how Lightspeed can meet your particular enterprise wants.