What is Point of Sale (POS)?

Point of Sale (POS), takes a central place in any retail and hospitality transactions. Read on to find out more about software and hardware that makes it.

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What is POS?

24 June 2020

small business POS point of sale

A point of sale system, often referred to as POS, is a central part of many businesses that operate from stores locally or in city centres. All POS systems are made up of two parts that work together to provide an all-in-one solution to running your business and taking customer payments - Software and Hardware. Both of these work together, taking inputs and gathering data to give you a centralised view of your sales and even your inventory and employee performance.

Quick links

→ What is the difference between EPOS and POS?
→ What is a POS system?
→ What is POS software?
→ What is POS hardware?
→ Why do businesses need a POS?
→ What are the types of POS systems?
→ Retail POS
→ Beauty salon POS
→ Restaurant & Hospitality POS
→ Mobile and Cloud POS (mPOS)

What is Point of Sale (POS)?

What is the difference between EPOS and POS?


Both POS and EPOS are sometimes used interchangeably, which isn’t always correct. A legacy point of sale is often offline (not connected to the internet) and is managed in store. More modern solutions like an EPOS are connected online round the clock to process payments and data in real-time.

POS systems usually come with specific hardware and are only compatible with the same systems, but EPOS systems are able to be more flexible, other equipment like tablets and mobile phones can be linked up for either input or output of key business data.

EPOS software usually is licensed as a subscription, meaning you won’t have to be responsible for maintenance like you would for a traditional POS system in-house.


What is a POS system?


As mentioned above, all POS systems are comprised of both software and hardware, both with several different parts that work together as a system. Below, we cover what each part does in conjunction with the other, along with benefits and uses for each.


What is POS software?


Software is essentially the operating system, similar to a home computer, where it displays a user friendly interface for taking payments and checking on inventory. The POS software comes programmed into any hardware as part of the system, and can be tailored to fit your business needs and customised to have features that are important to you.

There are two main options for POS software: On-premise and Cloud. The main difference is that On-Premise is kept locally on the system and doesn’t require an internet connection to run. The costs for these systems can run high, as you have to buy all of the equipment, including the hardware, upfront. Many businesses will take advantage of a merchant cash advance to either obtain or upgrade their POS equipment as it is often a necessary but large expense.

Cloud POS software on the other hand is stored on the internet, and requires a constant connection to run. This type of software is often lightweight and is easier to update, because you don’t have to worry about downloading update files onto your machine. There's greater flexibility about the hardware cloud services can run on, making it easier to set up an agile POS (for example, Mobile POS)  if you so wish.

If you are in the market to buy a POS, make sure to check that the software included is compatible with any payment processors you currently work with, so that your regular customers won’t have any trouble with their transactions. POS software can support your business operations in a myriad of ways, not just by processing transactions. Some features you may not be aware of include:


  • Employee management: You can create a profile for each employee, so that every time they login to process a payment there is a record of it, enabling you visibility on performance and a data trail in case you ever need to refer back to the payment.

  • Sales reporting: Collecting all your sales data in one place means that the software can analyse any patterns and inform your wider business strategy. Most systems will let you customise the metrics you see on your dashboard too.

  • Inventory management: A fully linked up POS system can be across your stock levels, letting you know when you are running low on an item. This can also inform your merchandising decisions when paired with sales reporting features, letting you take advantage of bestsellers and new product opportunities.

  • Customer management: Whether you have a fully fledged loyalty scheme or just send e-receipts with customer email addresses, a POS will be able to collate and safely store the data for use in your business, to manage membership rewards and discounts.


What is POS hardware?


Hardware is the physical equipment (as in a computer monitor, CPU, mouse and keyboard) that the software is housed in. Hardware allows the display of information and also the input and output of data used in POS tasks. These tasks could range from scanning barcodes with a scanner, inputting discounts with the keyboard, to printing receipts with a receipt printer.

Most POS systems come with a standard set of POS hardware for your business and might not include all of the peripheral accessories needed for your industry. These include:

  • Monitor: Displays the user interface for POS software, some are touchscreen allowing for input.

  • Credit card reader: Also known as a PDQ machine, this reads inputs from the chips on credit and debit cards, as well as data from the magnetic stripe. Modern versions also read RFID radio waves from contactless cards.

  • Barcode scanner: Reads barcodes and inputs them as a string of numbers that identify stock when checking out and for inventory processes.

  • Cash drawer: A place to collect cash from customers and store used vouchers and gift cards. Usually linked to the system for security purposes, meaning only POS login credentials with sufficient authority can open the cash drawer for refunds.

  • Receipt printer: Smaller and more efficient than a household printer, this prints onto rolls of thermal paper to give the merchant and the customer peace of mind and a record of the transaction to refer back to.

Why do businesses need a POS?


Before comprehensive POS systems were introduced, many businesses would have to rely on manual record keeping (for example a logbook or even an excel spreadsheet) and transaction processing. This would be tedious and prone to error, especially when dealing with sensitive data like credit card information.

With a POS system, everything is kept in one place and every item of hardware works together to manage the large amounts of data being processed in a working day. If you’re a busy cafe, you need equipment that can handle quick-fire orders with specific requirements to streamline the process from taking orders to fulfilling them, and a POS can help you to do that.


What are the types of POS systems?


Each business in their own industry will have their own needs and will differ, a retail business will have different needs to a beauty salon. Read on below to learn more about how a POS differs in each.


Retail POS


Retail businesses are rarely seen without a POS system, and this is due to the fact that many businesses deal with more varied stock than other types of businesses. POS software can categorise hundreds, even thousands of items by colour, size and type enabling shops to access their inventory levels at a glance.

Barcode scanners are also vital to this industry to quickly identify stock at speed, especially at the checkout. If you have an employee commission scheme, a POS will help you to track these with ease, and allow you to set up individual profiles for each of your staff to track their sales.

More advanced retail POS systems can connect across branches of the same businesses, so if an item isn’t in stock in one, a customer can reserve the item, and even pay for it in advance.


Beauty salon POS


In addition to the standard payment processing and sales reporting features, a POS tailored for the beauty industry will have a slightly different set of requirements.

Many salons operate on an appointment model, so it makes sense that a POS geared for this industry would include the software to do that. Other features include a customer database that records the frequency of visits, services paid for and will let the business know when to next contact the customer for their next appointment. Streamlining the process of managing repeat business is something that is very relevant to this industry.

Another key feature is staff scheduling, and if your business operates with freelance professionals who rent salon space, specific POS systems exist for salons to exclusively handle this. POS systems that handle appointment based can be used in other businesses including:

  • Hairdressers
  • Barbers
  • Nail salons
  • Tattoo studios
  • Massage therapists
  • Physiotherapists

Restaurant & Hospitality POS


With most restaurants, payment from the customer is at the end of a meal, meaning the process is slightly different for the POS. A key feature of restaurant POS systems is the ability to automatically send orders directly from the server to the kitchen, eliminating errors and speeding up the process. For a standard transaction using a restaurant POS, the process might go in the order below:


  1. Customers arrive and a waiter will take their order (either manually or with a mobile POS accessory).

  2. The waiter will input the details of the order into the POS.

  3. The POS will then send the order details to the ticket printer in the kitchen streamlining communication between the front of house and kitchen staff.

  4. The ticket printer in the kitchen prints the order and the kitchen prepares the items.

  5. The order is taken to the table and the waiter prints the final receipt for the table.

  6. The table pays with a mobile PDQ machine or cash and the transaction is complete.


The POS systems used are very similar for businesses that deal with food and hospitality, some other examples are:


  • Takeaway restaurants
  • Fast food services & drive-throughs
  • Cafes
  • Bars and Nightclubs
  • Bakeries & ice-cream parlours


Mobile and Cloud POS (mPOS)


If you’re a small business or startup and don’t process payments in the hundreds every day, then you may not need a fully fledged POS system with all of the hardware included.

Another option is the lighter and more flexible mobile POS, sometimes referred to a mPOS. These are often cloud based, and have a lower upfront cost. They usually come with an app (for your tablet or mobile phone) and a card reader. These apps are designed to be user friendly and require less training for your staff. It's a great option for small businesses that only offer a few product / service variants like a small bakery or a boutique jewellery shop.

mPOS systems are usually based on a subscription model meaning you’ll be paying each month for access, and you may not necessarily have ownership of any peripheral accessories if you stop paying for services. The major benefits of a cloud based mPOS is that you won’t be responsible for the maintenance and running of the system, so if anything goes wrong the provider will help you sort the problem.