What is POS? A definitive guide on Point of Sale and POS systems.

You might be wondering “What is POS, exactly?” 

You’re in luck, because in this guide, we’ll walk you through everything you need to know about POS or Point Of Sale. From the definition of POS all the way through functions, best practices, and more.

Your store won’t be complete without a solid Point of Sale system. The POS market is projected to reach $42.5 billion by 2027.  So we look at the best POS systems as well. They are a necessity for both brick-and-mortar and online stores.

So without further ado, let’s dive in.

1. What is POS?

Point of Sale (POS) is the place your customer makes a purchase or completes a transaction. You can also call it point of purchase or point of service. Often this is the check-out, where you’d find a traditional cash register. Online, the Point of Sale (POS) is the online shopping cart.

what is POS best POS systems

2. What is a POS system?

The combination of software and hardware used for processing transactions is called a POS system. The function of a POS system is to act as a simple cash register, but POS systems do much more. 

Most vendors now refer to their POS system as a retail management system. A retail management system adds features like:

  • Inventory management,
  • Supplier records, 
  • Membership features and CRM,
  • Loyalty marketing management,
  • Bookkeeping,
  • Stock transfer, 
  • Sales reporting, 
  • Quotations, etc.

3. Key POS terms

It is easy to confuse different POS terms and definitions. In order for you to have a better understanding of this guide, I’ll list key POS terms you should be aware of.

A salon POS terminal – image Blake Wisz

POS terminal

A POS terminal is the hardware or machine used to process and accept card payments. If you do in-store shopping, then you must have seen it before.

Here’s how a POS terminal works:
A debit or credit card is swiped on the POS terminal. Then the machine checks if the customer has sufficient funds by reading the magnetic strip on the card. If there is, it makes the transfer. 

The technology behind POS terminals is constantly evolving. Many advanced POS terminals now accept contactless payments using RFID chips and have  options for payment with Google Wallet, Samsung Pay, and Apple Pay.

Mobile POS (mPOS)

Mobile POS is a wireless device – tablet or smartphone – that doubles as a POS terminal or cash register. 

You download the POS software as an app and connect it to a card reader. This way you can take your POS system everywhere your business needs to be.

You’ll find mPOS useful if you interact with your customers outside of your business physical location. Or for instance in Bars and restaurants, if you want to ring up the invoice and order at the table. 

4. How does a POS system work?

The basic function of a POS system is to process transactions between the retailer or merchant and the customers.

A cash register does this too, but when you connect your cash register to hardware like barcode scanner, receipt printer, POS terminal, and POS software, you’ll be able to do more than process customers’ payments.

You’ll have a powerful tool that helps you monitor your inventory, use it as a CRM, manage employees, and so much more. Advanced POS systems also offer integrations to your small business marketing software and help you manage your business without stress.

Hardware and software components of a POS system

Every POS system is made out of POS Software and POS Hardware.  Let’s look at these two components in detail.

POS Software

Just like your mobile phone or PC, your POS needs an operating system. This operating system is the POS software. The POS software has a frontend and backend interface.

The frontend interface is accessed by the cashier processing the customers’ transactions via a display monitor or tablet. But the backend interface shows what happens behind the scenes and it is reserved for management and analytical functions.

These two interfaces are synchronized to provide the best POS experience.

When it comes to POS software, there are two types:

  • On-premise POS software
  • Cloud-based POS software

While these two help you achieve the same goal, they do have clear-cut differences. What are the differences between On-premise POS software Cloud-based POS software? 

On-premise software connects to a server located in your building.Cloud-based software connects to remote servers via the cloud.
You’ll need to purchase a software license and regularly maintain it.Your software is maintained by your service provider.`
Your information is stored in a closed network and can only be accessed on your building’s premises.You can access your information from anywhere as long as you have an internet connection.
You have to pay an upfront fee to install the software on your computer.Cloud-based POS software solutions charge a subscription fee for their services.

It is no secret that many businesses are switching to cloud-based POS solutions. This option is scalable and cost-effective. 

But, if you are charmed by the idea of your data never leaving your physical location, or have special (security) requirements then the on-premise solution is still an option.

POS hardware

Regardless of the type of POS system, the hardware set-up is made from several components. Your POS software needs to run on a device, right? So it starts with a  computer, which is the heart of the traditional POS system.

Display, monitor or Tablets

A lot of POS software can be operated on tablets or iPads. These are portable and give you access to a 360-degree view of your business.

With POS software installed on a tablet, you’ll have access to your inventory database, sales report, customer details, etc, depending on the capabilities of your chosen software.

Card reader

mPOS mobile credit card reader – image Blake Wisz

According to the Federal Reserve Bank of Atlanta, 75.5% of consumers have at least one credit card. So, unless you run a cash-only business, you’ll need a way to accept card payments.

Card readers help you process this sort of payment. They are quite affordable.

Barcode scanners

This is especially useful in a brick and mortar retail shop as it helps you automate your checkout process. It gives you instant access to product information like pricing, description, stock levels, and so on.

Cash drawer

Unless you plan on not accepting cash for your business, you’ll need a cash drawer. The cash drawer acts as a secure place to keep cash and other receipts for accounting purposes.

POS Receipt printer

As you might have guessed, this is a machine that prints receipts showing the details of your customers’ purchases. Some POS systems allow you to brand your receipt with your logo and add other types of promotions to the receipt. 

Paper receipts aren’t the only type of receipts. You can also send your customers an email receipt, a text / SMS receipt or update their customer profile on the website to show the billing details. The receipt is a reference to their purchases.

Network device

An internet connection is a must for any cloud-based solution. In the case of an on-premise solution, network devices will come in handy when linking your computers. 

5. Benefits of using a good POS system

Increased efficiency

POS systems can help you increase your company’s productivity by automating processes. 

For example, easy access to product information means a faster checkout process. Reducing lines and waiting times leads to more sales and happier clients. Time is money.

You can also automatically reorder stocks helping you save time and money.

Better employee tracking

A POS system can track your employees’ hours, speed, and pay. Advanced POS systems can also give you access to customer reviews regarding each of your employees. This can help you find your top-performing employees and those who aren’t pulling their weight. In short, a POS can give you the information to boost your employees’ performance. 

Improved stock and inventory management

Keeping track of your inventory can be a real headache if you do not have a way to manage inventory.

Using a POS system helps manage your stock. All you need to do is to input the current inventory levels and the system will update itself anytime a purchase (or return) is made. This is also useful for keeping track of your bestsellers

Accurate Sales tracking and reporting

Most POS systems give you reporting and analytics. While the comprehensiveness of this feature varies among the POS systems, they still give you an overview of your daily activities.

And also help you make sales and revenue predictions for your business.

6. What should your POS system do? 

A POS system can help increase the efficiency of your business activities by simplifying the not-so-simple tasks you engage in on a daily basis.

But if you are looking for a POS system for your business, you should know that they are all different in terms of functionality and efficiency.

Systems in the same price category will often offer you different features.

The following features are essential to a good POS system.

Inventory management

This is one of the most important features of a POS system. Through inventory management, you’ll be able to track every product – sometimes even the individual products on serial number.

Some systems also allow you to track inventory levels across different locations and automatically place orders when your best sellers fall below a certain number.

Employee management

Your employees are important to the success of your business. So you should pay attention to POS systems that allow you to manage and track their activities.

With this feature, you can add employees and give them tiered permissions. You can also see who your superstar employee is and who probably needs more training.

Customer relationship management

According to research, a 5% increase in customer retention can result in a 25% increase in profit. So, a POS system that offers customer relationship management features should definitely be at the top of your list.

CRM gives you the ability to accept and store customers’ information such as purchase history, email, phone number, etc. With some POS systems, you can even create a loyalty program and reward your loyal customers.


Most POS systems will come with some form of reporting and analytics. The data provides you the ammunition to make smart business decisions.

Ideally, your POS system of choice provides sales reports, customer reports, and inventory reports.


While this might sound like a no-brainer, you should make sure that your POS solution integrates easily with the apps and platforms that you use.
Check to see if you can integrate your POS solution with your Customer Relationship Management (CRM), payment solution, website, accounting software, project management software, and so on.

7. Industry specific POS systems

There is no one-size-fits-all approach when it comes to POS systems. But even then, some POS systems cater to the needs of specific industries and you’ll have to look for those specific functionalities. 

For instance,  a quick peek into types of POS systems based on industries:

  • Retail POS
  • Restaurant and bar POS
  • Salon POS

Retail POS

When you run an offline retail store, you can be sure that your needs will be different from that of businesses in other industries.

Retail POS systems come with features that are built specifically for merchants. Some of these features are:

  • E-commerce integrations for online stores
  • Scanner for accessing product information
  • Digital scales for weighing items
  • Employees fees and commissions

Restaurant and bar POS

Bars, nightclubs, restaurants, and cafes fall under the category of businesses that need a restaurant and bar POS.

This type of POS system offers unique features such as:

  • Self-order menu
  • Online ordering
  • Lay out and reservation management
  • Kitchen display system
  • Menu configuration
  • Cheque splitting
  • Contactless payment

Salon POS

A third type of POS system is the salon POS system. This is for business owners that run a salon, spa, hairdresser, or health business. Just like the other two POS types, salon POS has unique features that set it apart.

Just think of

  • Calendar and appointment management
  • Combined services and retail item checkout
  • Memberships management and CRM

So each of the POS systems has specific features that are typical for your own industry / process. 

Best POS systems for small businesses in 2024

Even after narrowing down your POS choices, there are still a lot of options, but don’t worry – better to have a look at some of the best and see how they differ, Here is a list of 5 top picks among the best POS systems that you can use in 2024 for your business. 

 5 POS systems for SMB

Here is our list with SMB POS systems and a short review of each.

Shopify POS

shopify best pos software systems

We know Shopify to be an hugely popular eCommerce platform, so it isn’t surprising that its POS system is here listed in our best POS systems.

To use Shopify POS, you need to have a Shopify store. Your subscription plan will determine how much you pay in card processing fees.

Here’s how much you pay according to each plan:
For the Basic Shopify plan ($29 per month), you’re charged 2.7%.
For the Shopify plan ($79 per month), you’re charged 2.5%.
For the Advanced Shopify plan ($299 per month), you’re charged 2.4%.

Shopify POS has two plans: Shopify POS Lite and Shopify POS Pro.

POS system features shopify

The lite plan is free to use and gives you features such as QR-codes, customer profiles, order and product management, mobile POS, and hardware accessories.

The Shopify POS Pro is $89 per month per location and it comes with additional features such as unlimited store staff, unlimited registers, smart inventory management, in-store analytics, omnichannel selling features, and the ability to assign staff roles. Have a look here.

Square POS

Best POS software square UP

Square POS is trusted by diverse small businesses – from restaurants to boutiques – and the ersatility has helped it become one of the leaders in the POS space. 

Square POS offers three pricing plans:

  • Free plan: free to use
  • Plus plan: $60 per month if you opt for the annual subscription
  • Premium plan: for enterprises that want a custom solution

You’ll pay a credit card processing fee of 2.6% + $0.10 for in-person payments and 2.9% + $0.30 for online transactions for using square’s integrated payment which is available on all three plans.

Each of the plans gives you access to features like sales reports, time tracking, barcode scanning, low stock alert, Instagram selling, gift cards, etc.

Square is among the best POS systems, and can be recommended to not only small business owners but also medium-sized and large corporations.

Vend POS

retail POS software system vend

Vend POS prides itself on its usability. It does have a simple interface and is easy to use.

Vend POS offers three plans:

  • Lite plan ($99 per month if you’re billed annually)
  • Pro plan ($129 per month if you’re billed annually)
  • Enterprise plan (if you want a custom-built POS solution)

All three plans give you access to real-time inventory management, unlimited product, integrated payments, unlimited users, analytics, 24/7 support.

But with the Lite plan, there is a monthly turnover limit of $20,000. If you exceed this limit three times within a year, you’ll need to upgrade to the Pro plan.

Lightspeed POS

lightspeed best POS software system

When it comes to iPad POS, look at Lightspeed. It provides a set of integrations that makes it easy for you to reach your customers, whether you are in the retail or restaurant industry.

Lightspeed offers customized pricing plans for these two industries. Retail has five plans

  • Basic ($69 per month)
  • Starter ($99 per month): includes e-commerce module
  • Standard ($119 per month): includes e-commerce module and accounting integrations.
  • Advanced ($169 per month): includes e-commerce module, accounting integrations, and loyalty program.
  • Pro ($229 per month): includes e-commerce module, accounting integrations, loyalty program, and analytics.

The restaurant POS has only one main plan which is $59 per month for a single register. You can add more registers for $34 per month.

The restaurant POS also offers two sets of add-on plans:

  • Add-ons ($12 per month): featuring customer-facing display, kitchen display system, advanced reporting, self-order table menu.
  • Premium add-ons ($39 per month): featuring loyalty app, self-order kiosk, loyalty, accounting, delivery integration.

You’ll also have access to their educational materials and 24/7 support.

Toast POS

Best POS systems Toast

If you are in the food industry – restaurant, bars, bakeries, Toast POS offers POS solutions specially designed for your needs.

You can choose from three different pricing plans:

  • Starter plan ($0 per month)
  • Essential plan ($99 per month)
  • Growth plan ($199 per month)

With all plans, you get a cloud-based POS, payment processing, customer care, and real-time fraud monitoring. 

You can also purchase extra add-ons like online delivery, gift cards, loyalty, restaurant email marketing, etc.

Toast POS is designed for restaurant success. It can be customized to fit the needs of different restaurant types including fine dining, casual dining, night clubs, bars, etc.

8. How to choose the best POS system for your business

How do you choose the best POS system to take care of your business needs?

I have gathered top tips that will help you make that decision.

1. Make a list of your POS needs

Start with writing down what features you need and want your POS system to have. Doing this, helps you be more focussed and slash the number of options you choose from.

This is because POS systems differ when it comes to functionality. So knowing what you want beforehand will make your decision-making process easier.

Here are five base questions you should ask yourself:

  • What features do I need?
  • Is there a POS system specially designed for my business?
  • What is my budget like?
  • Do I have plans for growth and expansion?
  • Can I trust the vendor?

2. Put a few vendors side-by-side

It is smart to look at multiple options. One of the first places to get inspiration is our own picks, but don’t forget to also check with your network. Ask other merchants who operate in your industry about the POS they use. Are they satisfied with it?

Side-by-side can compare different POS systems and understand each one of their strengths and weaknesses. You can have a look, but i’d not trust review sites blindly, many of the reviews are not very close to your real experience.

3. Don’t shy away from trials and demos

If a POS company offers you a free trial, demo, or a look at the hardware / software set-up. Grab it. This will allow you to get firsthand experience. From a free trial or demo, you’ll be able to decide if the POS software suits your needs or not.

9. How to set up your POS system

After choosing your POS system, it is time to get it up and running. This means we are going to set up the hardware and software of the system.

Hardware installation

At the very least, your POS hardware will consist of a monitor, a POS terminal, and a barcode scanner. To set up your hardware, connect each of the components to one another and the internet.

You should know that an internet connection is non-negotiable if you are using a cloud-based POS.

A power backup is also a must have, like UPS. So in case of power outage or short disturbance, the system can still run. 

Software installation

The steps to install your POS software depends on the type of software.

If you are using an on-premise solution, then you’ll probably have an agent from your service provider come over to install the software for you and guide you through the best practices.

But if you use cloud-based software, the installation process is simpler. You get instructions in the form of a step-by-step guide or video. Or you could just ask for assistance from your service provider.

Conclusion: What does POS mean (to me?)

So that’s our guide on Point of Sale (POS). If you are still thinking: “Can I survive without a POS system?”  It is not likely.  People have been running their business with a simple cash drawer for years. But you will be intentionally leaving a lot of money on the table by not even considering the POS options available.

Automation is key to growth and POS helps you achieve this. It increases your efficiency and helps you excite your customers.

About Miles Date

Miles is an digital marketing and business enthusiast with experience in growth marketing. He loves to write about all things tools, tech and tips.

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