What is a Point of Sale (POS) System?

Point of Sale or POS means the place where ordering and payment transactions are processed. 

A POS system is made of POS hardware and POS software. These components provide operators with the tools they need to accept popular payment methods, as well as manage and understand their overall businesses. A good POS system help could also help to analyse and order inventory and manage employees, customers, and sales.  

Traditionally, server-based POS systems were on-premise, which means they used an on-site server based in a specific area of the store or venue, and the desktop computer, cash register, receipt printer, barcode scanner, and payment processor were all set up at the front desk and couldn’t be easily moved.   

Fast forward to the early 2000s and cloud computing started to become popular. Then the advent of cloud-based storage and computing brought about the next step in POS technology evolution, mobility. 

1. It saves time 

• Speed up payments – Take payments by card and accept payments anywhere in your store or venue. Just carry a mobile EFTPOS machine such as Tyro Pay@table to take payments to the customer. 
• Speed up Inventory management – Some POS systems provide built-in stock and inventory management making it fast and easy to deduct and track stock and inventory as it's purchased. 
• Locate transactions faster – As all data is digitised, searching for transactions using the journal is easy, regardless of how old the transaction is.
• Say goodbye to manual data entry and stocktaking – No more writing down orders and counting inventory manually. You’ll be helping the environment as well by reducing paper usage.
  

2. Understand your business better 

• Keep abreast of your business – Reports and dashboards using your live, cloud-stored data will help you make better business decisions faster. Track your sales and performance so you can make adjustments on the fly and optimise revenue.
• Real-time inventory tracking – POS systems that allow you to track stock and inventory can send alerts when stock is low, complete purchase orders, and track your vendors. 
• Unbiased employee attendance monitoring – Monitor employees to see who sells the most, their performance and attendance.  

3. Build relationships with customers

• Build customer profiles – Some POS systems provide internal or third-party membership capability to provide personalised experiences and targeted marketing.  
• Reward customers – Get to know your customers better by tracking purchases and offering rewards along the way.
• Loyalty programs – Some POS systems provide loyalty program functionality where customers can collect points using different mechanisms such as a swipe or RFID card.

4. Get mobile

• Tablet POS systems – Smaller than your regular POS system, tablet-based systems are popular and regularly take the place of full-size POS terminals. Cloud-based POS software on a tablet is a great POS solution as it can be more affordable and take up less space due to the size of the tablet and no longer needing a physical server. Also great for events and trade fairs, just connect to wifi through your phone or a dongle and you're ready to take card payments.
• Smartphone POS systems – Some POS systems can go anywhere as they run on a smartphone. Useful for micro businesses, just attach a credit card reader and you’re ready to take payments anywhere your customers are.

The key components of a POS system
Modern POS systems consist of hardware and software components. Hardware assists in entering the data,  printing dockets and receipts and connecting the system throughout your store or venue. The software registers, processes, and stores transaction details and there are 3 types of POS software based on the way data is stored, server-based, cloud-based, and cloud-hybrid.

Hardware
All modern POS systems have a POS touchscreen terminal, tablet, or mobile device to process transactions (for front-of-house in hospitality venues) and a back office to configure and manage the system. 

The back office is usually accessed through a separate device such as a laptop or desktop PC but for cloud-based and cloud-hybrid POS software, some back-office interfaces can be accessed through a browser making them available through your smartphone as well.

Depending on your store or venue set-up, other hardware that might be required includes docket and receipt printers, cables to link everything up, cash drawers to handle cash, EFTPOS machines to process cards, kitchen video displays for a paperless kitchen, RFID cards or bracelets for fast secure login and loads more.

Staff processing transactions use the frontend interface and the backend is usually accessed in a separate browser or application window on the same device or a separate computer. 

Software
There are many different brands of POS software available.  They differ in the type of industry and size of business they are built for (retail Vs Hospitality), the number of features and functionality they provide, and the way data is stored.

For smaller businesses with fewer users and requirements, a lite system might be suitable as the process for transactions and reporting might be quite simple.

For a larger business with many users over a few sites, a more advanced system with permissions-based login, and additional modules such as stock and inventory and staff management would be more suitable.

Obviously, as the software requirements increase, generally so do the price and data storage requirements.

Many POS software platforms provide modules to add to the system. Sometimes they are included in the price of the system which can be great if you require that particular module, or not so great if you have paid for it but you don't need it, and sometimes there is an additional charge for each module. Software modules can include stock and inventory, staff management, reporting, loyalty, membership, and loads more.

Software Integrations
Another way to get these features is to add third-party integrations to your POS software setup. We call this a tech stack as we 'stack' 3rd-party software systems and get them to pass information back and forth, saving time and improving accuracy.

Many brands of POS software are integrated with other popular software that provides the best-in-class functionality for their field. Some examples of this are accounting integrations through MYOB and XERO, reservations through Now Book It and ResDiary, and online in-venue QR code ordering through Mr Yum and me&u. By doing it this way you get the very best of both systems.

Server-based on-premise POS Software
Software is installed ‘locally’ on your own servers such as a computer permanently based at your store or venue. 

Things to note about this type of POS software include: 

• This type of POS software is mostly sold as a once-off license purchase which you then own forever.
• For outright license purchases, support and upgrades can be an additional expense.
• As all data and software are stored on a physical server, this could be stolen or damaged and all data lost.
• As the server hardware gets older, it will also need to be updated.
• The front and back-office of these systems are usually connected through physical cables, but can sometimes use wifi to connect as well.
• This type of POS software is great for operators who want to pay once for their software and not pay ongoing fees.
• Increased financial risk and therefore barrier to change as it generally involves a large financial outlay at the start but over time it's written off, and when kept for many years the cost becomes negligible.

Cloud-based POS Software
Cloud-based systems rely solely on an internet or data connection. They process transactions on a POS terminal or tablet and send all data up to the cloud for storage. 

Things to note about this type of POS software include: 

• If you are located in an area with intermittent internet, a totally cloud-based system might not be the best option. If the internet goes down you will not be able to process transactions.
• If the software is hosted online, i.e. data are stored on your POS provider's internet servers, you might be able to access it from any computer browser.
• Also called software-as-a-service (SaaS), this system is automatically maintained and updated by your POS provider.
• Most SaaS POS software is charged as a monthly subscription fee which often includes upgrades and support.
• Some POS systems also charge per transaction and while this may look cheap from the outset, as the number of transactions increases, so do your POS fees.

Cloud-hybrid POS Software
As the title indicates, this type of POS software combines the functionality of cloud-based and server-based systems. The main feature of a cloud-based hybrid POS is that it will keep operating if your internet or data connection goes down. This type of POS will store transaction data in the software until your internet connection is reestablished, then send the data to the cloud.

Things to note about a cloud-hybrid POS system include:

• The main feature of a cloud-hybrid POS system is its reliability as the software works well in locations where the internet might be intermittent or not available.
• Storing data in the cloud makes it available for mobile reporting through an app or browser on your smartphone, tablet, laptop, or desktop.
• As it's not server based, you can usually access and update your POS from anywhere.   
• Maintenance, updates, and support fees can be included in the monthly subscription fee.
• It usually requires a much lower financial outlay at the start but fees continue throughout the use of the service.

Which POS software is right for your business?
On-site POS software was the norm for quite a while but cloud-based or hybrid systems relying on both the internet and local hosting are now just as common. On-site POS software can be more expensive to set up, often requiring professional assistance and maintenance. Cloud-based systems tend to be more affordable at the beginning (usually paid as a fixed monthly cost or as a percentage of each transaction processed) and with more options to integrate with other software programs. 

Finally, POS applications can differ hugely in terms of features, functionality, and user experience. Each business sector has its own needs that specialised POS systems accommodate. For instance, restaurants may need table management, reservations, and QR code for at-table ordering.  The best Hospitality POS systems are built to manage many styles of service, provide security around transactions, ease of use, and live mobile reporting.  To work out the best POS for your business, first work out your requirements, how you want to pay, and the functionality you need, then get in touch with a few suitable providers and get a demo of their system.  You'll quickly get to know the most suitable system for your business.  

Mobile Point of Sale Systems
Smartphone and tablet POS systems mostly process payments and some may have limited functionality to track inventory and collect customer information. In some cases, the app and hardware are free but you pay a percentage of each transaction to the POS provider. This could be a suitable POS option if you do not process many transactions and you need to be mobile but if the number of transactions increases over time, operators can end up paying much more than they would for a monthly fee. These POS systems usually work with a receipt printer or receipts can also be emailed.

Tablet POS systems
Tablet Point of Sale solutions are increasingly popular since they require minimal upfront investment and you can often use a tablet that you already own. Some tablet POS services are charged per transaction and others require a low monthly subscription fee but allow you to choose your own credit card processor. Many support compatible hardware such as barcode readers, cash drawers, and tablet stands. Some are simple applications and others can manage complex stock and inventory tracking and manage employee time. 

Countertop Terminal POS systems
A terminal Point of Sale system is usually located on the counter of your local cafe or restaurant. While they are generally stationary, most still require access to the internet and some use cloud-based software. The setup often includes receipt and docket printers, cash drawers, POS terminals, and sometimes barcode scanners. 

Restaurant solutions can integrate with mobile ordering devices, kitchen printers, tablets for @table ordering, and online ordering. Some versions can include stock and inventory tracking, printing labels for retail, and e-commerce integration. Some are "free" but you pay a percentage of each transaction. 

Online POS system
An online POS will allow you to use your own hardware such as a PC or tablet and this will contribute toward the startup costs. Although a PC or tablet might not be as good as a POS touchscreen, for low-volume, big-ticket sales, it could be suitable. For businesses processing fewer transactions, a standard printer might also work well.  A completely online system allows users to log in from anywhere, using any device.  

Self-service kiosk POS
Most kiosk POS systems are specialised for a specific purpose. For example, you may offer a self-service kiosk for customers to order their food and drinks instead of going up to the counter.  Another helpful option is setting up a few kiosks in your large retail store to let your customers look up pricing and product availability. In hospitality, online ordering through personal mobile devices is replacing some instances where a central self-service kiosk may have previously proven popular.  Self Service kiosks must be maintained by the business whereas mobile devices are maintained personally.

Multi-channel POS systems
If your business sells products and services in more than one online or in-person location, you'll benefit greatly from multichannel POS systems. This type of POS system integrates sales across your online store, social media pages and storefronts and/or venues. As a result, you're less likely to run out of stock, because your inventory for one sales route isn't synced with your other channels. 

Multi-site & Enterprise POS systems
For larger businesses and organisations with multiple sites, a multi-site POS is the best option. Able to manage products, menus, users and reporting across many sites, a multi-site POS can restrict or open reporting and functionality by users and sites.  Reporting and functionality can be centralised to the head office or dispersed to sites. For example in the case of a franchise, where some sites are owned individually and some are owned by the Franchise organisation but they all still need to report to the head office.

Enterprise-sized organisations might also need a managed POS system where the POS provider acts as an extension of the business and is much more involved in the day-to-day management of the POS system across many sites.

Open-source POS systems
With open-source POS systems, POS software can be customised to function as the business requires. Software engineers are often required, so this type of POS software can be expensive but it might be the only option for larger businesses with customised POS needs. 

How POS systems are changing
The biggest change in POS systems over the past few years is the affordable options now available for small (or even micro) businesses. While large operations may still require a sizable upfront investment, there are now many more mobile cloud-based options available. Cloud-based and cloud-hybrid POS software, and tablet hardware options, are making POS systems much more affordable and accessible.

Server-based POS Systems
With server-based POS systems (aka legacy POS, on-premise POS, hosted POS), data is stored on a local server at the business. That means the business owner or manager usually needs to be present at the physical location to view reports, make changes to the menu, or any other task involving the Point of Sale software. 

Today business operators expect more from their POS system and being tied down to one location to access their POS is not popular. However, 20+ years ago when Point of Sale systems became popular with large enterprises, there wasn’t much choice.

By default, all traditional POS systems have some of the following factors that limit agility simply because of age:  

Database 
Database selections were limited. You had Visual Basic, C++, or Delphi to develop in. POS software developers had to pick a database structure and wrap their entire product around it. 

Programming Language 
The software company’s developers had to pick a programming language and standardise it across the entire application. 

Operating System 
For the software to execute its tasks and commands, an Operating System (OS) was required and at the time, Windows was the only OS with a substantial market share and that's why Windows was used to build many legacy systems. 

Cloud-based POS Systems
When it comes to cloud-based POS, your POS data is stored on a hosted server in a remote location (“the cloud”) and accessed via the internet. 

Everything is web-based and app-driven these days, so using a web browser to run your back office from anywhere makes more sense than physically going to your office to access your POS back office and reporting. Cloud POS systems also eliminate the in-store server configuration leveraged by legacy software and replace it with a cheaper, easy-to-manage server in an offsite data centre.  And because the data is stored in the cloud it can be used in live reporting software and apps so you can access your business data from anywhere, with any device.

However, if your POS is purely cloud-based and your internet goes down, you will not be able to process transactions. This is where a cloud-based hybrid POS is a better choice for any business because, let's face it, sometimes the internet does go down.  When this happens your cloud-based hybrid POS continues transacting and stores the data locally in the software until the internet is reconnected. Then the data is once again sent to the cloud for storage. For reliability and confidence in your system, a cloud-based hybrid is usually the better option.

Increased data visibility
With cloud-based POS, you can take your business anywhere with an internet connection. You can view inventory counts, labour usage percentages, productivity reports or your daily totals remotely – and in real time. Your business information can be easily accessed from wherever you are so you can continuously keep abreast of your operation.

Decreased downtime during updates
For server-based POS software, each device must be updated individually which causes downtime and can lead to inconsistencies that take time to sort out, further disrupting your workflow.

For cloud-based POS software, upgrades are rolled out to all devices at once from the cloud. This means all devices are updated simultaneously from one location greatly reducing the time required to make the update.

Increased mobility
With a cloud-based POS system, devices can be added to make the POS more mobile which means you get the functionality of a mobile POS system without fully installing one. Using any smartphone, tablet, or robust handheld device, software and information can be accessed from anywhere allowing employees and managers to complete important tasks while they’re on the go, as long as they have an internet or data connection.

Information management connected across multiple locations
For more than one venue or store, centralise data from all sites using a cloud-based POS. Set up permission levels for owners and managers to access only the information they need to do their jobs. Centralise reporting and menu distribution from head office or allow sites to manage it themselves. A good cloud-based POS will offer flexibility in how the system is set up to manage multi-site situations.

Increased data security
When building a cloud-based POS software solution, security is vital, but the system is only as secure as the web server it is hosted on. That’s why many developers choose world-class web servers such as the Microsoft Azure platform and the Amazon Web Server. When researching cloud-based POS software, it’s a good idea to find out where your business data will be stored.

Web servers provide the added advantage of continuously backing up your data to the cloud removing the risk of losing it in the event of a power outage or hardware malfunction. Plus they provide advanced security protocols such as encryption to protect data from viruses and breaches. 

Previously the best POS software option available, with the introduction of cloud-based POS software, the overarching popularity of server-based, on-premise POS software for hospitality businesses has decreased in the last couple of years. But it's important to note that for larger more complex businesses, sometimes a server-based system will still be the only viable option due to the features and functionality required by the business. 

Although more time-consuming to install, for bars, restaurants, cafes, sports clubs, nightclubs and loads more venues there are still advantages to purchasing a server-based system which include:

Outright ownership
Server-based on-premise POS systems are usually sold outright which means the license is owned forever. This might mean a higher cost to purchase but the lack of ongoing fees means that over time the cost is amortised and POS costs removed from the budget.

Reduced downtime
On-premise systems allow businesses to continue operations and process customer transactions without an internet connection (although cloud-hybrid POS software does this too).  Some on-premise POS systems can process transactions faster as the system is communicating with the server located close by. 

Advanced features and functionality
As server-based on-premise POS software systems have been developing for a long time, some business operators will choose this type of system as they feel it could provide a higher level of features and functionality compared with cloud-based POS software.  But with cloud-based and hybrid systems maturing, it's best to compare the individual systems to see if this is still the case.