What is POS? The Definitive Definition

The Elusive POS Spotted in Its Natural Habitat

Key Takeaways

A Point of Sale (POS) system is a computerized system used to manage transactions in a retail or hospitality environment.

  • A POS system can streamline transactions and reduce lines by allowing customers to make purchases quickly and efficiently.
  • A POS system can also help businesses keep track of inventory, sales, and customer data.
  • POS systems can give businesses valuable insights into their operations and help them make more informed decisions.

Overall, a POS system can be a powerful tool for businesses of all sizes. It can help businesses run more efficiently and effectively while also providing valuable data that can be used to make informed decisions.

So what is POS? POS stands for point of sale. A point of sale (POS) is a retail location where transactions are typically completed at the end of a customer’s shopping experience. It can also refer to the software and hardware used to complete these transactions.

Merchants typically use a POS system to complete a sales transaction. A POS system can streamline the checkout process for store employees and customers and provide valuable data about sales and customer behavior.

This guide will explore basic definitions and show examples of point of sale (POS) systems. We’ll also discuss the purpose of a POS system, how they work, and the benefits of owning it.

With this information, you’ll have a greater understanding of all these business terms, and if you’re looking to purchase a POS, we will describe various types and show you where to compare and find the best option for you.

What is a POS System?

A POS system is a computerized system used to streamline the process of selling products or services. POS systems are commonly used in retail environments but can also be found in other settings such as restaurants, bars, hotels, salons, and spas.

POS systems typically include hardware components such as a cash register or electronic point-of-sale terminal and software that handles inventory management, customer tracking, and sales data analysis. Some POS systems include barcode scanners and credit card readers to streamline the check-out process further.

POS systems can offer many benefits for businesses, including increased efficiency and accuracy, reduced costs, and improved customer service. POS systems can lead to shorter wait times and a more streamlined customer shopping experience.

There are hundreds of different systems on the market; to find one, you can search the POS directory.

What is a POS System

A modern POS system will consist of a touchscreen computer that operates with POS software to complete product orders and accept all payment types.

The physical equipment or POS hardware will typically be bundled with a POS terminal, receipt printer, credit card reader, cash drawer, barcode scanner, kitchen or bar printer (for restaurants), and possibly even an on-site computer server for older legacy systems.

Newer technology services like cloud-based and hybrid point-of-sale solutions run on iPads and tablets where your data is synced and stored online, eliminating the need for an on-premise server like legacy software and hardware.

There are hundreds of POS companies available online, and the cost and prices will vary depending on your business environment and how many terminals you need.

Most companies will offer a cloud-based solution and mobile point of sale functionality. Having these options is mostly a no-brainer these days because you have access to all your sales and programming data online remotely or through an App.

To dive deeper into the meaning and definition, we will also explore the various types of POS systems for sale available on the market.

Watch POS System Examples

Types of POS Systems

1. Restaurant POS Systems

Why is a point of sale system needed for a restaurant? You need a point of sale for a restaurant to accept cash and credit card payments. In addition to receiving payments, you need to be able to track all your financial and tax data.

Most restaurant POS solutions have reporting features built-in to monitor your transactions by date, time, and type. But that’s only the beginning of the features and benefits you can expect.

There can be hundreds of features that can streamline your operations and make your restaurant more efficient. For instance, most restaurant POS systems allow you to put in an order and send the request directly to a kitchen printer reducing errors in the kitchen and increasing staff and food prep efficiency.

Another benefit would be tracking inventory and food usage. You can also follow payroll with a built-in time clock feature.

A restaurant management system is recommended if you’re a restaurateur and want to be competitive in the business. Many types of restaurants need to utilize a POS like full-service restaurants, quick-service restaurants, fast food, take-out only, cafes, pizza shops, etc.

No matter what kind of restaurant you own or if you’re starting your dream restaurant, you need to accept payments of all types securely. Also, you’ll need all the features that a quality point of sale system provides to aid in restaurant management and growing your store’s customer base.

Example of Restaurant using POS System

Restaurant software offers many hospitality functions that help your restaurant run smoothly and streamline the management of your establishment. Utilizing features like inventory management will help you find where to cut food costs and boost profit margins by using recipe costing.

Most restaurant management systems offer an option or service to cost your recipes so you can see recommended pricing to ensure you’re turning an adequate profit.

Recipe costing is just one example of features a restaurant computer system can provide. You’ll need other features and services, including restaurant marketing, customer management, online ordering, loyalty program, server sales performance, new versus repeat customers, invoice purchasing, menu performance, employee management, and sales reporting.

So you start to see with all the options available that the advantage of using a modern point of sale far exceeds not having one or using a simple cash register.

Another significant advantage of using restaurant management software is the ability to send orders directly to the kitchen – this is a considerable advantage by increasing food prep time, staff efficiency, and reducing errors in the kitchen.

If you’re doing handwritten tickets, think about how many mistakes and the time lost from that method. With a POS, there are fewer errors and faster prep times because the menu items are sent directly to the kitchen, and the chef and prep staff can easily read the ticket to prepare the meal.

Chef Checking POS Orders in Kitchen

The reality is your competition is using a modern restaurant management system to improve customer service, so if you’re not, you’re potentially losing customers to your competitors.

Also, when customers search online for “restaurants near me,” you want to show up in search results and monitor your reviews and ratings so you can keep tabs on your reputation management. A good restaurant point of sale company can help you with this.

The only negative to implementing a new restaurant management system is the training time and challenge of learning new software. But that’s only temporary; once you learn the back-end and front-end of the software, you and your staff will be pros in no time.

One example of a popular restaurant POS system with many of these features that restaurant owners look for is called Toast.

Restaurant Pro Tip Summary:

If you’re starting out, make sure your restaurant POS system has all the features you need to operate your business at an affordable price point with the features that allow you to grow.

Always get a demo of the software online or in person if possible. You want to make sure it’s user-friendly, and you need to experience what you’re purchasing – this is a significant investment in your business, so make it a smart one and compare your restaurant POS options here.

2. Bar & Nightclub POS Systems

Although there is software designed specifically for bars, most point-of-sale systems used by restaurants can also be an excellent solution for bars.

A fast, efficient and reliable bar and restaurant POS system, like Harbortouch Bar & Restaurant, featured on Bar Rescue, can mean the difference between success and failure in the bar and restaurant business.

In busy restaurants, nightclubs, and bars, speed is essential to service, so you want to make sure your point of sale software and hardware are as fast as possible, credit card processing is integrated, and it has all these features mentioned below. If not, you’re going to hate your P.O.S, and you’re going to have some unhappy customers.

If you own a bar or restaurant and bar, there are some specific requirements you’ll want to consider for bars and nightclubs. Of course, there are POS systems dedicated to bars and nightclubs; however, you’ll also find that many of the top restaurant point-of-sale systems have features for bar management.

Example of Bar POS System

The main feature to look for in bar software is preauthorization (or “preauth”) of payments for tabs management with bar and liquor inventory control to protect profits. Also, speed functions like reordering rounds, bar prep printing, fast checkout, and quality 24/7 support are equally important.

For the reporting side, you’ll want to see your labor costs compared to sales, product reports, and all your sales and tax reports.

The additional register features to consider for nightclub and bar point of sale software are employee management, inventory management, customer loyalty, recipes, tab management, quick reorder rounds, and quick customer checkout.

Reporting is also critical to keep track of your food and beverage taxes. Also, you’ll want to have online access to see your labor costs and sales reports.

Bar Pro Tip Summary:

If you’re considering a tablet cloud-based POS for your bar, test to make sure you have a fast internet speed and reliable wireless connection. Most iPad and tablet systems require a Wi-Fi connection, so you need a quick and dependable wireless network infrastructure to process orders and payments.

Also, you’ll want to ensure you have a failover internet connection in place, or you need to implement a backup plan to put in orders and accept payments if your internet goes down.

Due to PCI security standards, most POS systems have an offline option to take orders but not payments. Not sure of the best option for your bar or nightclub? Complete our questionnaire, and we can help you find the best option here.

3. Retail POS Systems

Retail point of purchase (POP) systems is primarily for retail environments. So that means you would most likely never use restaurant software for a retail shop and vice versa.

Some software or Apps on the market claim to be cross-platform, but that doesn’t mean you should ever use them.

Retail businesses can have particular requirements and features that other programs will not. They can have retail shop features needed such as color and size matrixing, inventory tracking, RFID tags, employee commissions, gift registry, customer database, layaway, and purchase orders.

Also, a retail POS system may include a digital scale or barcode scanner for weighing or scanning items. You will need a barcode generator if you want to create and print your own barcodes. This can be accomplished with free online tools or paid software.

Retail Point of Sale Example

There are hundreds of different kinds of retail management systems on the market. That’s because there are many retail environments, and each business may have specific requirements.

For instance, a grocery store, liquor store, or convenience store will need particular hardware and software capabilities compared to a small clothing shop. So keep in mind that cost and features will vary depending on your business type.

Here’s a summary of the top features a retail POS should offer your company:

  • Credit card processing
  • Contactless payments
  • Inventory tracking
  • Multi-store scalability (if you have or plan on having multiple locations)
  • Color and size matrixing
  • Product variants
  • Employee commissions
  • Customer database
  • Gift registry and layaways
  • Purchase orders
  • Sales reporting
  • Hardware integrations like barcode scanners and digital scales
  • Software customization
  • Software/hardware support
  • Mobile and cloud-based technology

As you can see, there are many options and features to consider regarding retail POS technology.

Reporting is also a paramount consideration, so when selecting a retail management software, you’ll want customized reporting with detailed customer reporting, sales reports, vendor reporting, and inventory stock levels.

Retail Pro Tip Summary:

If you’re considering purchasing a new retail point of sale, visit a similar store near you and find out what kind of system they use. Ask the management or owners how well they like it and then search reviews online to ensure it gets positive reviews – this will give you a good starting point when researching a new system.

Additionally, if you’re starting a new retail business, ensure the retail software has all the features and reporting you will need with all the hardware required to run your business correctly. You can also compare retail POS systems here.

3. Small Business POS Systems

A small business point of sale system could come in many shapes, sizes, and flavors. Search small business POS systems online, and you’ll find yourself in the middle of a battle over the latest product of the week because they’re hundreds, if not thousands. Most of the current small business POS technology is app-based and on mobile platforms.

Remember I mentioned earlier in the bar systems section that using a cloud-based system is probably not the best idea? Well, in the case of small businesses, we’re going to cut tablet apps some slack. Most mobile small business systems are light, flexible, and cost-effective.

If you’re not processing an enormous amount of volume and speed isn’t as critical (like in a restaurant or bar), then a mobile POS could be just the answer to save you some money.

Additionally, many apps can be very feature-rich and have everything you need without spending thousands on a “traditional” touchscreen POS terminal.

For example, an iPad or tablet is perfect for environments like a small retail shop, little restaurant, yogurt shop, boutique store, cafe, or coffee shop. Places where you need quality features and functions but a cash register may not be enough to get the job done.

If you need inspiration for your next small business, check out our list of the most popular small business ideas.

Small Business Pro Tip Summary:

Finding the best small business POS system for your business can be a challenge with all the different products on the market.

Finding the cheapest product is not always the best idea because it might not give you all the features you need or even cost you more to get the additional add-on features you need.

Our best advice is to complete our questionnaire to find the best solution for your small business needs.

5. Cloud and Mobile POS Systems

A cloud-based POS system is a point of sale platform that stores information in the cloud. Cloud-based systems typically don’t record much information on your terminal device. Instead, all data is stored in the cloud and synchronized across multiple terminals.

The terms cloud and mobile point of sale systems are sometimes used interchangeably. Cloud-based software is generally on a tablet POS that’s used on-premise.

mPOS is a subcategory of cloud-based POS and is usually an App on mobile devices like an iPad or Android tablet, and even on smartphones.

According to pointofsale.com, one of the main advantages of cloud software is that it eliminates the need for expensive onsite servers to manage your data, unlike “traditional” terminal and server-based computers.

Cloud and Mobile POS

Here are a few of the advantages of a cloud or mPOS system:

  • Access from anywhere – All your data is stored on a server in “the cloud,” which means you always have access to your data.
  • Cost-effective – Cloud POS systems generally cost a monthly subscription fee without any contractual obligations – this can remove the entry point for a quality system without spending thousands of dollars upfront for software licensing.
  • Easy to use – Tablet and mobile POS are easier because the staff is already familiar with mobile devices, so the learning curve can be shorter than the traditional point of sale machines and software.
  • Software updates – Regular cloud updates can be pushed out to your App or online software, so you always have the program’s latest and most secure version. Also, most cloud companies offer updates at no additional charge as part of the service or support agreement.
  • Quality support – Most mPOS companies, offer support as part of your SaaS (Software-as-a-Service) agreement. As long as you’re a paying customer, customer service should be included. 24/7/365 software support is the norm in the tablet and mobile industry.
  • Mobility – mPOS allows you to be “mobile” where you can accept orders and payments at a vendor show or take orders on the floor of your restaurant or retail store.

While most of the point-of-sale solutions on the market offer cloud or mobile options, you’ll want to consider all options on the table. The cloud might not be the way to go if you have a slow or spotty internet connection.

You may not need a mobile solution if you don’t plan on taking orders with tableside service or away from your shop. Sometimes a traditional hard-wired or localized solution can still be the best solution.

Mobile POS Pro Tip Summary:

Before implementing a mobile or cloud POS system, run a speed test on your internet connection and ensure it meets or exceeds the speed requirements of your vendor. Having slow or intermittent internet speed can wreak havoc on your system.

For instance, an iPad POS system like TouchBistro has failover security if your internet goes down. It’s highly advisable to ask your vendor what protection is in place if the internet goes out on your mobile POS system. You can quickly find the best iPad POS vendors here.

6. Salon and Spa POS Systems

Nail salons, hair salons, and spas all require a particular set of POS options due to the nature of the business. Options like the following are all vital to having:

  • An online appointment calendar
  • Appointment reminders, a
  • Customer database with details for a previous haircut or nail styles
  • Retail functionality,
  • Inventory management,
  • Online employee scheduling
  • Employee management
Image of a Salon and Spa

Nail and hair salon POS systems can sometimes crossover for other business types like barbershops, gyms, fitness clubs, beauty schools, massage parlors, pet grooming, and tattoo parlors, to name a few.

That is because these other business types will especially require an appointment calendar and may need retail functionality with inventory control, and not every software program has those features.

Salon and Spa Pro Tip Summary:

If you’re a small salon, you might not need all the features of a more advanced salon software system. You might be able to use something simple and inexpensive, like a Square Terminal.

If you have multiple employees and if you do booth rentals, you may want to carefully consider a full-featured salon management system.

How Do POS Systems Work?

Understanding the basics of how point-of-sale (POS) systems work and the implementation process is essential, especially if you’re looking to buy a new system.

There is a big difference between POS systems and cash registers, but generally speaking, functionality is typically uniform across platforms because a POS machine is used to ring up sales and accept payments. That’s the most simplistic explanation of how they work.

When implementing a new POS solution, there are several steps to consider to become more familiar with the process.

Here’s an overview of how POS systems work:

  1. The Setup – There are software and hardware components depending on your business type. For instance, you need a retail POS system if you own a retail store. If you run a restaurant and bar, you need a point of sale software and hardware dedicated to restaurants and bars. The two systems wouldn’t be interchangeable. So you’ll need to work with a POS provider that offers the appropriate solution for our business environment.
  2. Programming – Your point of sale software must be programmed to accept the menu, products, and inventory you sell. Most POS companies will program your menu or inventory items as an existing customer or for a fee. Otherwise, you can program everything yourself. Either way, your software has to be programmed to begin using for transactions – this can be a time-consuming process, especially if you have many items, so always give yourself plenty of time before trying to go live.
  3. Payments – If you plan to accept credit card payments with your POS, you must sign up for a merchant account with a merchant services provider. A merchant processing account is required to accept credit card payments from your customers. A merchant service provider and even some POS companies will offer a merchant account to integrate with your point-of-sale, or you may be able to use a 3rd party merchant provider.
  4. Installation – Most companies offer some service or support to provide installation. We highly recommend you take advantage of these services. It’s important to get a proper installation to ensure all your software and hardware work appropriately according to the company’s recommendations. Otherwise, you risk technical issues, and that’s the last thing you need when trying to operate a business.
  5. Training – Training and support are critical to getting the most out of your software. Some companies will offer online or remote training, but if you can get onsite training with your staff present, that’s the best scenario. However, know that most modern POS software is user-friendly and easy to learn for you and your staff.

What is a Mobile Point of Sale (mPOS)?

Mobile POS (mPOS) is a wireless solution with an App on iPads, Android tablets, or smartphones that allows you to take your business with you anywhere you’re conducting business.

mPOS is popular for businesses of all types, even large restaurants and retail shops. The top iPad POS systems on the market that we like and recommend are TouchBistro for restaurants and ShopKeep POS.

Mobile POS (mPOS) example

One of the primary benefits of considering using a tablet to capture sales is that they’re smaller and less bulky than your traditional point-of-sale terminals. Many restaurants and retail shops prefer a smaller footprint over large PC-based systems.

They also allow for taking orders and payments tableside at full-service restaurants or showing customers images of products on the floor, for example. Pricing can also be less expensive than its traditional counterparts.

There are many other benefits of mobile POS for restaurants, but one negative to consider is that it’s a wireless system, so you need to have a good and fast wi-fi connection for everything to work correctly.

Do a little research into point-of-sale software, and you’ll find more mobile POS solutions than you can shake a stick at. Everyone is coming out with a new mobile point of sale platform. You’ll want to compare features and prices and look at some demos before pulling the trigger on making a purchase. The good news is you can compare the most popular options here.

What is a POS Payment or POS Transaction?

A POS transaction is simply any transaction that occurs within a business. Whether you’ve sold a food item, retail product, or service, a point-of-sale transaction occurs when money is exchanged for your product or service.

The “point” of sale payment is when a customer and merchant exchange products or services completing a POS transaction, aka point of sale purchase.

The actual transaction’s physical location is defined as the point of purchase (POP), so the difference between POS and POP depends on the context when they’re used. There is usually a form of payment involved to complete the transaction, such as credit cards, cash, debit cards, EMV, and mobile payments.

POS Payment Transaction

A typical point-of-sale transaction will happen at locations such as a quick-service restaurant, a convenience store, or a department store. However, a POS purchase can happen anywhere with the increase in mobile payment terminals.

Nowadays, it’s possible to make a sale almost anywhere, such as utilizing table-side service at a full-service restaurant, on a food truck, or even at a traveling vendor show.

If you’re new to POS systems, you may have questions about this unique form of technology. We receive many questions about the definition and meaning of POS and its core components. Let’s take a look at some of the top questions we receive:

FAQ

What does POS stand for?

POS stands for Point-of-Sale. You may also see this term referred to as Point-of-Purchase (POP). POS refers to the point at which you and a customer perform a transaction for a good or service.


What is the definition of POS?

The definition of POS is simply a location, system, or terminal where a transaction occurs. In most cases, a point of sale (POS) system is a hardware and software system that processes transactions and records data.


What are the different types of POS systems?

There are many different types of point of sale systems, including iPad POS, Mobile POS, Android, Traditional Touchscreen, Web-Based POS, and Self-Service Kiosks. There are hundreds of different POS systems on the market, with the most popular being Mobile and iPad POS.


How much do point of sale systems cost?

The cost of POS systems varies greatly depending on the business type and how many terminals are needed. As an example, for a small business with one POS machine, we estimate you’ll pay around $1,250 for hardware and about $69 per month for a software subscription. As more POS stations are added, the price will increase.


What is a POS example?

In modern terms, a POS system is typically a POS software product installed on a touchscreen hardware device. For example, if you’ve ever paid for anything on an iPad, you’ve seen a modern sample. In the past, the most common model was the traditional cash register.


How does a POS system work?

A POS system works by processing transactions and recording the data from the sale. When a customer orders food or purchases an item, you accept payment directly through your POS machine. After the transaction is complete, it will be recorded and saved — this helps you track your business’s performance and streamline your accounting processes.


What is the purpose of a POS?

As a merchant, you need to be able to accept payments and track your sales in the easiest, fastest, most secure, and most reliable way. The purpose of a point of sale (POS) is to be the top employee in your business that makes your life easy and helps to grow your business.

That said, if your top employee (your POS) isn’t working for you anymore or helping you be more profitable, it’s time to find and buy a new POS!

That’s why it’s important to research your purchase and find the best POS solution for your business. It needs to have all the features and functions you need to grow your customer base and increase profit.

Summary

The definition and abbreviation of what is POS can mean several different things; for instance, P.O.S. can stand for “Positive,” “Program of Study,” “Parent Over Shoulder,” or “Point of Service.” It can also be modern slang I’d rather not repeat, but you can find more acronyms for POS here and here. In the business world, mainly related to banking, retail, and restaurant businesses, the actual definition of POS is Point of Sale.

In this POS guide, we discussed everything related to POS systems, including the meaning of POS, the definition of mPOS, what the difference is between a cash register and POS, how a point of sale system work, and the different types of systems with examples.

We want this to be the definitive guide, so if we left anything out or if you have any questions or comments, please let us know below.

We’d love to hear from you! Also, if you found the information in the article useful to you, we’d be very grateful if you’d share it with others.

Editor’s note: Have any questions about this guide or POS systems in general? Ask away in the comments below, we’re happy to help!

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14 Comments
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  1. It always amazes me to learn about the different systems and technology that companies use to run smoothly. It seems really cool to me that these point of sale systems are able to integrate so many different aspects of communication and efficiency for a company into one system. It’s interesting how you point out that restaurant POS systems can even track inventory and food usage along with sales and tax data.

  2. Great article and examples of POS systems. You can also find another definition of POS at the urban dictionary here. https://www.urbandictionary.com/define.php?term=pos You’ll be surprised at what else it stands for.

  3. I really got into this post about the meaning of P.O.S. I found it very interesting and loaded with unique points of interest. Thank you for sharing this great content, I found it very useful in my research.

  4. A very helpful and in-depth article about what POS (Point of Sale) means and how it applies to different business verticles. It’s funny, I thought it meant something totally different. I have shared this out to my audience on my blog. Have a great day, cheers!

  5. I agree with the “Purpose of Point of Sale” section of your article that states that “…the purpose of a point of sale is to be a top employee in your business that makes your life easy and helps to grow your business”. As someone who has dreamt of opening up a smaller-end restaurant in the future, I can definitely see the benefits of having one of these terminals in your restaurant or other places of business. I will be sure to look into the installation process when the time comes to open up my place of work.

  6. I’m curious about how point-of-sale systems work that I’m usually seeing in restaurants and shops. It’s interesting to know that there are different software and hardware components that are specialized for different industries. If I had a retail store, I think I’ll get one so that I can easily keep track of the profits that come by day by day.

  7. I love the way that you have explained the POS in such a simple and easy manner with the required examples. The amount of data provided is sufficient for newcomers entering the world of POS systems. A very informative blog. Great work and keep posting such informative articles.

    • Thanks Pratheek and everyone for all the great comments. Don’t forget to share the article on your social channels to help educate others.

  8. It was really informative when this article talked about how businesses can have access to a customer database and sales reports if it has a POS system. I would imagine that there are many different POS systems that businesses can choose from when they are initially getting started. If I was a business owner, I would want to get a modern POS system that would make my business much more efficient.

  9. You made a good point when you shared that a POS system is helpful to complete transactions for a store. It is great to improve the efficiency of the business so every process can be done faster and smoother. I would like to think if a business is planning on improving its efficiency, it should consider getting a POS system from a reliable supplier.

  10. Please what are the general advantages of using a POS System?

    • Hi Tunde, thanks for the great question. Here are a few general advantages and benefits you can expect.

      1) Faster service – quicker ordering and checkout, assuming you have a reliable POS.

      2) Boost productivity – with features like inventory control and employee management.

      3) Improves accuracy – Accurate pricing and detailed reporting.

      4) Prevents errors – fewer ordering errors and less chances of theft.

      5) Various payment and loyalty options give customers more options for making different payment types like credit/debit cards, contactless payments (Apple Pay), and loyalty points.

      6) Cloud-based – most modern POS systems are on the cloud and have options for mobile devices, which is almost a requirement for many industries these days.

      Anyway, there are just a few I could think of off the top of my head. I hope it helps!

  11. It’s interesting to know how point of sale systems have been really beneficial in giving customers different payment options especially now that it’s pandemic. I would imagine that acquiring this type of system as a business owner can widen your income opportunities. This is simply a service that is worth investing in if you want business growth.

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