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What is POS? The Definitive Definition and Guide to Point of Sale Systems

Jason Feemster

May 16, 2023

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The Elusive POS Spotted in Its Natural Habitat

So what is POS? POS stands for point of sale. A point-of-sale (POS) transaction is what takes place between a merchant and a customer when a product or service is purchased, commonly using a point of sale system to complete the transaction. To compare different types of POS systems, visit here.

So when you’re at your favorite restaurant or retail shop, and you make a purchase, you are completing a point-of-sale (POS) or a point of purchase (POP) transaction.

Merchants typically use a POS system to complete a sales transaction. In its most basic definition, a POS system is a combination of POS hardware and POS software to create a POS machine for processing a transaction and payment.

Cash registers are not as evolved as using a POS system and lack many of the functions and features of a modern point of sale system. A cash register could be considered a point of sale solution technically; however, for our definitions, we will be focusing on point-of-sale machines (aka POS terminals) that involve both software and hardware.

In this guide to the meaning of point of sale, we’ll explore basic definitions and show some examples to clear up any confusion on terms like POS system, POS, Point of Sale Machine, and POS purchase.

We’ll also discuss the purpose of a POS system, how they work, and the benefits of owning it. By the end of this article, you’ll have a greater understanding of all these terms, and if you’re looking to find a point-of-sale system for sale, we will describe various types and show you where to compare and find the best option for you.

Check out a video summary of the guide here:

What is a POS System?

A POS system is synonymous with a POS terminal. However, a POS terminal is the electronic equipment performing the sales transaction and processing the credit card payments. Used in most storefront businesses, a computer terminal combined with the POS software helps to manage everyday sales transactions and operations.

Like you learned above, with the combination of the POS software and a POS terminal, you now have the full definition of a POS system.

A point of sale system is the heart of a business and provides benefits for tasks such as inventory management, labor reporting, menu customization, price adjustments, staff management, sales reporting, customer management, marketing initiatives, and so much more.

The next time you’re at a restaurant or retail store, ask the clerk what type of system they are using, and you’ll soon learn there are hundreds of different kinds of POS vendors available on the market; to find one you can search the POS directory.

A modern POS system will consist of a touchscreen computer that operates with POS software that’s used 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 on the market, like cloud-based and hybrid point of sale solutions run on iPads and tablets where your data is synced and stored online and eliminates the need for an on-premise server like with legacy software and hardware.

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

Most companies will offer a cloud-based POS 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 are also going to explore the various types of modern POS systems for sale that are available on the market.

Watch an Example of a Point of Sale System

Types of POS Systems

1. Restaurant POS Systems

Why is a point of sale system needed for a restaurant? The primary reason you need a point of sale for a restaurant is 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 POS system provides to aid in managing your operations and growing your store’s customer base.

Restaurant software offers many hospitality functions that help to make 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. Some other features and services you’re going to need potentially are restaurant marketing, customer relationship 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 loss that becomes of 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.

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.

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 that has many of these features that restaurant owners look for is called Toast.

If you’re just 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. Here are some additional restaurant expert tips:

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 that’s 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 POS hardware and software is 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 these types of establishments. Of course, there are modern POS systems dedicated to these business types; however, you’ll also find that many of the top restaurant POS systems have features for bar management.

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 critical as well 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.

3. Retail POS Systems

Retail POS software is primarily programmed for retail business. So that means you would most likely never use restaurant software for a retail shop and vice versa.

Some retail POS systems or Apps on the market claim to be cross-platform, but that doesn’t necessarily mean you should ever use them. Depending on your business type, dedicated niche-specific retail software is typically the best option.

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 management, 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.

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

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

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

• Credit card processing
• Inventory management
• Multi-store scalability (if you have or plan on having multiple locations)
• Color and size matrixing
• Product variants
• Employee commissions
• Customer relationship management
• 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 when it comes to retail POS technology.

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

4. Small Business POS Systems

A small business POS 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 POS 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 don’t require large volumes or speed in transactions (such as in bars and restaurants), then a mobile POS solution could help you to save some money. Moreover, lots of apps feature everything you need without the expense of a touchscreen terminal.

For illustration, an iPad or tablet may be perfect for small shops, restaurants, yogurt stores, boutiques, and cafes, situations that require efficient features but surpass a basic cash register.

If you are seeking inspiration for your next entrepreneurial endeavor, have a glance at our list of the most popular small business ideas.

5. Cloud and Mobile POS Systems

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

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

mPOS is a subcategory of cloud-based POS systems and is usually an App on mobile devices like iPad or Android tablets 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.

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 based 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 to use because the staff is already familiar with using mobile devices so that the learning curve can be shorter over the traditional pos systems.
• Software updates – Regular cloud updates can be pushed out to your App or online software, so you always have the latest and most secure version of the program. Also, most cloud companies offer updates at no additional charge as part of the service or support agreement.
• Quality support – Most mobile pos system 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 modern POS systems 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.

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
• Customer database with details for a previous haircut or nail styles
• Retail functionality
• Inventory management
• Online employee scheduling
• Employee management

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

How Do POS Systems Work?

Understanding the basics of how a point of sale system works and the implementation process is essential to know, especially if you’re looking to buy a new system.

There is a big difference between POS systems and cash registers. Still, generally speaking, functionality is typically uniform across platforms in the sense that a POS machine is used to ring up sales and to 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 how to use a POS system.

Here is how POS systems work:

1. The Setup

There are software and hardware components to consider depending on your business type. For instance, if you own a retail business, you need a retail POS system.

If you run a restaurant and bar, then you need a POS system dedicated to restaurants and bars. The two systems wouldn’t be interchangeable. So you’ll need to work with a POS vendor that offers the appropriate solution for our business environment.

2. Programming

Your POS software has to be programmed to accept your menu, products, and inventory that you’ll be selling. Most POS companies will program your menu or inventory items as an existing customer or additionally 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 a lot of items, so always give yourself plenty of time before trying to go live.

3. Payments

If you plan on accepting credit card payments with your POS, then you need to sign up for a merchant account with a merchant services provider. A merchant processing account is required to accept payments with a credit card reader 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 make sure all your software and hardware works 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 super critical to get the most out of your software. Some companies will offer online or remote training, but if you’re able to get onsite training with your staff present, that’s the best scenario. However, know that most modern POS software is very user-friendly and easy to learn for you and your staff.

What is a Mobile Point of Sale (mPOS)?

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

Mobile POS systems are 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 Lightspeed for Retail.

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

They also allow the ability for taking orders and payments tableside at full-service restaurants or for showing customers images of products on the floor, as examples. 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 POS software, and you’ll find more mobile POS solutions than you can shake a stick at. It seems everyone is coming out with a new mobile POS system platform. You’ll want to compare features, prices, and look at some demos before pulling the trigger on making a purchase.

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 physical place the actual transaction occurs 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.

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.

Frequently Asked Questions

If you’re new to POS systems, you may have a few questions about this unique form of technology. We receive tons of 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:

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 Purpose of a POS?

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

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

That’s why it’s so 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.

What are the Different Types of POS systems?

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

How Much Do POS 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 POS 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, the order and payment are accepted directly through the POS software. 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 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.

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 helpful to you, we’d be very grateful if you’d share it with others.

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