What is a POS?
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Written by Zayan Ikram

August 14, 2020

Having a proficient POS System is a key component of running a successful retail business. So, what makes it such a necessity, and why is it so important?

What exactly is a POS?

A Point-of-Sale (POS) Transaction is what takes place when a customer makes a payment in order to purchase a product or service. The hardware, software and the procedures that allow this transaction to take place is a Point-of-Sale System. It is a central component in every business where the sales, inventory and customer management tethers.

As you can imagine, running a retail store successfully requires tasks such as managing inventory, generating sales reports and handling accounts in a streamlined and efficient manner. A modern POS system should handle all these requirements in one place. However, in a survey conducted by softwareadvice.com, 56% of single-store retailers still do not have a POS system in place. Instead, many choose a cash register and handle their accounts on a spreadsheet. Lacking a POS system that allows you to easily attend tedious and time-consuming tasks such as inventory management and sales reporting leads them to miss out on opportunities to grow their retail business.

So, given that there are so many drawbacks of not using a proper POS system, why do many retailers opt out of this? It seems to be that the fear and overwhelming nature of implementing new technology, especially when there are already processes already running in place, scares them away. Due to this, we have to inform retailers about the negative consequences of not implementing a POS system.

In this article, we will aim to educate you on all components and features of a great POS System. We will also clarify terminology such as POS Machine, POS System, POS Transaction and explain why you should most definitely have one.

History of POS

Cash Registers were essentially the first POS machines. The first POS Systems were made to emulate the basic functions of Cash Registers. However, as technology evolved, POS Systems enhanced the features of cash registers and added many more much needed features on top.

Nowadays, a modern POS System almost emulates the entire business process, giving you all the necessary information while allowing you to manage most of the business tasks in one place. Some even allow you to create and manage e-commerce stores through the POS, while others include employee management services for HR. If a certain feature is not available in the POS System itself, most systems can be integrated with others that provide the lacking feature.

Early POS systems or cash registers require you to use different tools for accounting, reporting, and marketing and this lead to double entry of data, which then increased the costs by having employees spend their time on entering data that already exists in the system.

Components of a POS

As mentioned above, a POS system is a combination of both software and hardware required to execute the processes relating to a POS Transaction.

Hardware Components

These are all the pieces of hardware required for the POS system to work. This includes:

  • Terminal/Monitor/Tablet: For the POS Software to run on.
  • Card Readers
  • Eftpos Machines
  • Printers
  • Cash Drawer
  • On-site Server (for on-premise POS)

All or some combination of this hardware would be a POS machine.

Software Components

This is the application that runs on the hardware which connects all the bits and pieces together. There are two main types of POS Software available in the market today. These are Cloud POS and On-Premise POS. Here are the differences between the two:

Cloud POS:

  • Software is accessed on any device with an internet connection usually through a browser.
  • Maintenance and updates are done automatically for all the users in real-time.
  • Fewer individuals are required to manage the POS
  • Much lower upfront cost, usually a subscription fee depending on the terminals.

On-Premise POS:

  • Software has to be installed physically at the location usually on a computer with a server at location.
  • Updates and maintenance have to be done by buyer or software provider at the location.
  • Usually requires IT personnel to maintain the system.
  • More expensive upfront cost as server and other hardware needs to be purchase.
  • Takes more effort and is longer to set up.

Cloud POS’ came into the space as technology evolved through the years. They are much newer than on-premise solutions which have been in existence for decades. It seems like there are more benefits of opting for a cloud solution over an on-premise solution but there might be certain scenarios where an on-premise POS is a better option. We have a detailed article on our opinion which system you should choose here.

The most important things to keep in mind when choosing a POS software is flexibility and ease of integration. These are some questions you might want to keep in mind before you choose your POS software:

  • How easily can the software implement your business process?
  • Can it integrate with any other software you are using for accounting or e-commerce?
  • Can you choose a payment gateway of your choice so you can cut costs?
  • Will it handle multiple departments and locations if you have more stores or are looking to expand?

Essential Features of a Good POS System

Sales Reporting

Sales Reporting enables you to capture and analyse your retail business’ sales data. It allows you to see concrete information regarding the sales of your products, which lets you analyse which products are doing well. This can help you make better marketing decisions to better sell these products.

Sales Reporting allows you to see a complete snapshot of your entire operation. Removing the guesswork can help you identify opportunities you may have missed out on so that you can focus on these profitable areas which were lacking in your operation earlier.

If you are an owner of a business, cloud POS solutions can allow visibility into your entire operation from anywhere through your mobile device.

Inventory Management

Inventory Management allows you to automatically keep track of the complete catalogue of items your retail store has to offer.

Managing your stock efficiently according to the requirements of your business is very important to ensure you don’t lose money where you don’t have to. Reordering stock based on how quickly your stock clears for a certain item will allow you to utilise your warehouse efficiently. Since your stocks are also being kept track of automatically, a lot of the redundant work such as manually counting stocks can be eliminated, allowing you to save time and money.



E-Commerce Services enable you to sell your products online, opening another stream of income to your retail store.

A good cloud POS will either offer E-commerce services as part of their package or allow you to integrate with other e-commerce platforms of your choice. Having an e-commerce store has become a necessity to remain competitive in today’s market, especially with the Covid-19 pandemic where online orders have skyrocketed. Your physical store, and your online store must work together to bring in the most sales possible and some POS software has features in place just for this.

Feature Complete POS

The POS is where the customer makes the payment to purchase your product. A good POS will do much more than just accepting the payments. All the tedious processes such as manually looking up an item and checking prices should be eliminated removing all chances of human error. Finding what you need at the click of a button increases efficiency thus further reducing costs. These features paired with the ones mentioned above remove all redundant processes which improves the profitability of your business.

Customer Management

Customer Management allows you to capture and analyse your customer’s purchase history. This is important because you can engage with your loyal customers on a deeper level, increasing the number of repeat buyers while creating ambassadors for your brand.

Customer management creates even more opportunity to boost your revenue by tailoring loyalty programs for your most valuable customers, so that they keep coming back for more. Identifying a loyal customer can create deeper bonds between your business and the customer depending on how they are treated at checkout as well.

What should you do next?

There are two possible reasons you ended up on this article. One is out of genuine curiosity and the other is because you are a retail store owner looking for the best POS system to take your business to the next level.

Our team at FI-ES Systems have been working tirelessly to create the ultimate POS system that addresses all the needs of you, our customers. Our cloud POS, IDZLink.com was developed keeping in mind all the potential requirements mentioned above. We have our own accounting module, so you don’t have to integrate with a third-party provider. We also have our on e-commerce webstore that gets automatically created and maintained for you depending on how you entered your items for the POS. All the essential features for a great POS discussed above is also present in our system and we are constantly looking for ways to identify your needs and address them. So, have a look through our demo after signing in, and try our free demo to decide if you want to proceed with us.

In case you were looking for an on-premise POS, you can have a look at FI-ES Magnolia, our Cloud ERP Solution that has been developing for over 2 decades now.

In Conclusion

According to research by softwareadvice.com, most of the potential customers that look for a system find out that the essential features are paramount in making their decision. Whichever POS solution you decide to go for, we hope you keep an eye out for the factors mentioned above. This will ensure you make the best decision, which is a critical decision for the growth of your retail empire.

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