What Is a Point of Sale System? Here’s Everything You Wanted to Know

If you’re a business owner, you know nothing is more satisfying than making a sale. When a customer wants to pay for your product or service, it’s a sign that you’re doing something right.

We’ve all heard the phrase “ringing up a sale.” However, there isn’t a whole lot of ringing happening these days. The “ka-ching” of old-school cash registers has been replaced by more modern POS (Point of Sale) systems.

And that’s generally a good thing for business owners. Because point of sale systems can do much more than process transactions; they are capable of carrying out tasks that could empower business owners to reach new levels of success.

Want to know more about how a point of sale system can help your small business?

In this article, we will walk you through what a POS system is, how it works, what it costs, and how to choose the right POS system for your business.

We also will cover some of the biggest benefits of point of sale systems.

What is Point of Sale?

Whether it’s a “ka-ching,” a chime, or a swipe of a credit card, a point of sale is that moment when a customer buys your product or service. They may be shopping online or in a physical store or location.

For example, if a customer is at your food truck, the point of sale happens when they tap their debit card on your tablet. In a retail store, it’s when they hand their credit card to the store clerk. And online, the point of sale is when you go through the checkout process on a brand’s e-commerce website.

What is a Point of Sale System?

A point of sale system is the hardware and software that facilitates a business transaction. POS systems allow businesses to accept and process customer payments, whether they are online or in person.

Today’s POS systems are capable of processing all types of payments, including:

  • Cash
  • Checks
  • Magstripe credit cards (the ones you swipe)
  • Chip credit cards (the ones you tap)
  • Contactless payments such as Google Pay or Apple Pay
  • QR codes
  • Gift cards

Do you run a business where customers prefer to pay in cryptocurrency? No problem. Many POS systems can handle that too!

How a POS System Works:

Many POS systems have a central computer that is connected to a cash drawer, barcode scanner, and receipt printer. When a customer makes a purchase, the POS system will record the sale and print a receipt. The POS system can also be used to track inventory and customers so it isn’t uncommon to see POS systems with included features like inventory management, customer loyalty programs, and accounting.

Most of us are already familiar with point of sale systems because we use them to make daily purchases. As a business owner, you may want to be clear about each step, so we’ll walk you through the process of a POS translation using a simple example:

  • You’re at the barber shop getting a haircut (you’re looking fresh, by the way).
  • At the checkout counter, you add a travel-size shampoo to your purchase.
  • The sales associate scans the shampoo with a barcode scanner and selects “haircut” on the POS-enabled tablet.
  • The system software calculates the two items, including sales tax.
  • There’s an option to add a tip, so you select 20% on the POS-enabled tablet. The software adds the tip, and you see the final total.
  • You swipe your credit card through the card reader, which uses software to send an authorization to your bank.
  • Your payment is approved, and the transaction is processed.
  • The barber shop’s POS software automatically updates its inventory to show that one bottle of shampoo was sold.
  • You have the option of a digital or paper receipt, and you choose to have the receipt emailed to you.
  • Your transaction is complete!

As you know, it may take only a minute or two for a translation like that to happen.

These days, many shoppers expect businesses to have digitally powered, contactless transactions that work as swiftly as the apps on their phones. Without a POS system, you risk frustrating would-be customers and losing revenue.

Before we dive into the many benefits of a point of sale system, we’ll walk you through the options you have for hardware and software.

What is POS Hardware?

Point of sale systems typically comprise hardware and software. POS hardware is the device that makes the software function at the point of purchase.

Every system uses software, but not all businesses need point of sale hardware.

For example, if you have an online store, you don’t need hardware, like a tablet, to accept payments. If you’re a brick-and-mortar business though, POS hardware is an absolute must, and you will need specific software to get the most functionality from your system.

When deciding which type of POS hardware is right for your business, consider how and where you do business and which forms of payment you want to accept.

Here are the most common types of point of sale hardware:


Most of us are familiar with tablet touch screens, which is why they are a user-friendly choice for businesses. Employees and customers can use a tablet to confirm a price, add a tip, sign an authorization, and select a receipt option.

A POS-enabled tablet can be a game-changer for businesses still using a clunky cash register. These sleek, portable devices can be housed on a stand near a checkout counter or be picked up and used throughout a store or restaurant. Also consider purchasing a POS tablet stand which is great for keeping your desktops and service counters as uncluttered and clean for customers as possible.

Credit card readers.

If your small business isn’t using a credit card reader, we strongly suggest you invest in one. When you use point of sale credit card processing, customers can pay securely by swiping, tapping, or inserting the card’s chip into the reader.

Card readers can help your small business receive payments quickly and efficiently. Plus, they’re generally affordable and simple to set up.

POS Barcode scanners.

Barcode scanners connect to your POS system and allow you to view the details of an item. You can check the price and inventory of the scanned item, and then use the scanner to ring up a sale. Advanced barcode scanners also support specialized scans, such as QR codes, which customers can use to redeem special offers.

If your small business isn’t using a barcode inventory system, you should consider implementing one to potentially save time and money. One reason to adopt barcodes is that they reduce the potential for transcription errors that can occur when you manually key in product information. Over time, mistakes like that can be costly.

Receipt printers.

Raise your hand if you love printed receipts. Anyone?

OK, so most of us will toss that tiny piece of paper in the trash. However, that doesn’t mean your small business shouldn’t invest in a receipt printer.

Some shoppers will ask for a printed receipt at the checkout counter, so you will want to be able to accommodate them. A printed receipt also gives you a place to advertise upcoming sales and loyalty programs. If you run a restaurant, you could also consider investing in a kitchen printer to help you manage your orders and receipts.

Cash drawers.

A cash drawer may seem like an unsophisticated piece of hardware, but synching it to your point of sale system can help you track your cash transactions. POS software connects to your cash drawer and tracks your transactions by generating data each time the drawer opens and closes. A connected cash drawer can protect your cash payments and minimize employee fraud.

What is POS Software?

POS software are programs that integrate with different pieces of POS hardware, such as barcode scanners and receipt printers, and are designed to help businesses manage their sales and inventory.

The cash drawer is an example of where physical hardware can integrate with POS software to bring more features and functionality to your business.

Many businesses use POS system software for inventory tracking, sales reporting, customer data management, employee management, and mobile connectivity. Your business may not need all these features, but if you want to increase your productivity and profits, there’s probably a POS software solution for you.

What are the Advantages of a Point of Sale System?

Shifting from a cash register to a point of sale system may feel like a daunting task, but don’t check out yet. There are many advantages of having a POS system for your business. These are just some of the benefits you’ll want to consider:

1. It’s a time saver.

One of the biggest shopper complaints is the time it takes to check out. In one survey, 75% of businesses reported losing customers due to wait-related issues, including waiting in checkout lines, among others.

You don’t want a customer to leave your store with nothing but a memory of a long, frustrating checkout line.

When it comes to efficiency, today’s POS systems have the edge over manual cash registers. Everything from reading a barcode to scanning a credit card can shave time off your customer’s transaction, increasing customer satisfaction. A happy customer is more likely to be a return customer — and recommend your business to friends and family.

2. It can boost your revenue.

Improving customer satisfaction through efficient service is one way to boost your revenue, but there’s another benefit to having a POS system. Having a POS system makes it easy for you to add new ways to interact with your customers — whether it’s through online sales, subscription services, or mobile events. When you expand your sales channels, you create potential new revenue streams for your business, which can increase your bottom line.

3. It’s scalable.

A good point of sale system should be easily scalable. And that isn’t always about growth.

Your business may need to adapt to industry changes or new customer behaviors. If you have POS scalability, you’re able to change or add features and functionality when your business needs a shift. Not all POS systems are created equal, so make sure you find a POS system that can adjust to your specific needs.

4. It simplifies inventory control.

Inventory management can be a tricky balancing act for small businesses. You need to have enough inventory to satisfy customer demand, but not so much that you’re wasting space and money on overstocked items.

An integrated POS system will track how much inventory is going out and coming in, making it easier for ordering managers to stay on top of what you have and need.

5. It gives you access to valuable data.

Having data at your fingertips can help you make swift business decisions that are essential to your company’s success. Modern point of sale systems automatically store relevant data, including your customers’ purchase trends, which products sell the quickest, your busiest time of day, and how many transactions your employees make during their shifts.

Valuable data can help business owners address inventory issues, assess the effectiveness of advertising, track employee performance, and guide them toward intelligent business decisions.

6. It helps your business stay current.

Point of sale systems are the wave of the future, and businesses of all sizes should consider adapting to keep up.

You may find that switching to a point of sale system attracts new customers or that existing customers are delighted by the upgraded technology. What may seem like a difficult change for your business may actually be a simple shift that helps you stay relevant and potentially grows your business.

Point of Sale Security

Point of sale systems use sophisticated technology to transform your business. The problem with technology is that it almost always comes with some level of risk.

POS software is no exception. With minimal security features, a POS system may leave your data vulnerable to malicious attacks. That’s why it’s essential to protect your small business.

If a cybercriminal finds an unsecured IP address or hacks into your Wi-Fi connection, they could steal your customer data, which would wreak havoc on your operations. We wrote another article that explains how cyberattacks happen and how to protect your small business from dangerous cyber threats.

While you should understand the dangers of cyber activity, the possibility of an attack shouldn’t prevent you from reaping the benefits of POS technology. Instead, follow these steps to safeguard your point of sale system:

  • Ensure your Wi-Fi connection is secure and private.
  • Change the default settings on a new POS system.
  • Use encryption to protect your data.
  • Use complicated system passwords and change them often.
  • Keep your POS system software up-to-date.
  • Hire a reputable IT company to assess your security risks.

Why Cyber Insurance is Important and How it Protects Your Business

Implementing security measures is an essential first step in protecting your business from a cyberattack. But as cybercriminals become more sophisticated, preventing an attack on your business may be impossible.

That’s where cyber insurance comes in.

Many small business owners have business insurance, which protects against losses and liabilities. Cyber insurance is a specific policy that covers the costs of claims associated with stolen customer data, cyberattacks, breaches, and fraud.

Here’s how cyber insurance works:

Let’s say a hacker gains access to your point-of-sale system and threatens to publish all of your customer data unless you pay a ransom.

This type of cyber threat is called ransomware. The hacker demands a large sum of money to unlock the data so you can regain access.

Most small business owners don’t have the money to pay a ransom. That’s where a cyber insurance policy kicks in. Cyber insurance can help cover the payment so you can get back to operating your business.

Cyber insurance helps cover, up to your policy limits, the high cost of claims associated with stolen customer data, cyberattacks, breaches, and fraud.

Here’s what cyber insurance usually covers:

  • Crisis management expense
  • Forensic and legal expenses
  • Fraud response expense
  • Extortion loss
  • Public relations expense
  • And more

What cyber insurance usually doesn’t cover:

  • Potential future lost profits
  • Cost to improve system security
  • Loss of value from theft of intellectual property
  • And more

Cyberattacks can be expensive, time-consuming, and stressful. Even after a cyberattack resolves, your business may suffer disruptions while you determine the cause of the breach and figure out how to safeguard your business.

Cyber attacks on small businesses like yours may leave the small business owner responsible for:

  • Finding and fixing the breach
  • Notifying the customers
  • Providing credit monitoring for affected customers
  • And more

While you can’t predict a malicious attack on your business, you can get the coverage you need if a worst-case scenario happens.

That’s where we can help. At Simply Business, we’ve made finding and buying cyber insurance simple and easy.

We work with leading insurers to find the best coverage for your business at an affordable price. And we make it easy to understand what you’re getting and how much it costs.

Start with our cyber insurance online quote tool right now to compare policy options and purchase online.

Or call one of our licensed insurance agents at 855-869-5183, Monday through Friday, any time between 8 a.m. and 8 p.m. (ET). Our agents can answer questions, walk you through the process, and get you insured, typically with just a single phone call.

Get Insured in Under 10 Minutes

Get an affordable and customized policy in just minutes. So you can get back to what matters: Your business.

How to Choose the Right POS System for Your Business

When it comes to POS systems, there are two questions every business owner will have:

“How to choose the right POS system?”

“How much do POS systems cost?”

In this section, we’ll tackle the first question.

Choosing a POS is an important technology decision that affects how your business will operate in the future. Whether you have a physical location or an online store, follow these steps to find the POS system that’s right for you:

1. Evaluate your business.

Before you think about what you need, think about what you already have.

Which tools are you already using? If these no longer serve your needs, make a list of must-have features for your point of sale system. If you don’t want to start from scratch, look for a POS system that will integrate with the software, apps, or platforms you’ll continue to use.

How you sell your products and services is another factor to consider. If you operate on a sales floor, you might consider a mobile POS system that runs on a phone or tablet. Consider which features you’ll need to track sales and inventory and how much customer information you want to capture.

Ultimately, you will want to evaluate every aspect of your business to determine the scope of your POS system and how it can improve your daily operations.

2. Research offerings.

Once you have a wishlist of features and requirements, it’s time to research some POS solutions for your business.

Begin with an online search for articles focused on small business POS systems. You’ll find plenty of top-ten lists like this one. Articles like these usually highlight the most current offerings and provide an easy way to compare features and costs.

Here’s another tip: Find out what similar businesses use for point of sale. Get a recommendation from business owners you already know or connect with your online business community.

3. Reach out to providers.

You’ve narrowed your list down to two or three providers. Now what? The next step is to reach out to them for a deeper understanding of their offerings.

Here are some questions to ask potential vendors:

“How does your point of sale system process business activities more effectively than others?”

Talk to the provider about your current process and explain what you want the POS system to do for your business. Ask about the hardware and software required to make the POS system fit your requirements, and have them walk you through the features.

“Do you offer customer support?”

Let’s face it; even the best POS system will require tech support. Ask about their customer service offerings, how to contact them, and if service is available 24/7.

“How much does your point of sale system cost?”

Make sure each provider is clear about how their pricing works. It’s best to get everything in writing so you’re not surprised when you get your POS system bill. We’ll dive deeper into POS system costs in the next section.

4. Get a POS software free trial before you buy.

Taking your POS system for a test drive is a great way to try the POS software before committing. Many providers offer 14 to 30 days for free trials, which should be enough time to test the hardware and software.

If a POS system doesn’t work as you expected, you can usually get a free trial from another POS solution. Test driving two systems may increase your confidence regarding your final choice.

How Much Does a POS System Cost?

Your needs are unique, so the cost of your POS system may differ from other businesses. Much of it will depend on the hardware and software you choose — and your budget.

A typical POS setup can range between $1,250 and $8,000. That’s a broad range, but don’t forget that many point of sale systems are scalable. So when you’re shopping for a system, bear in mind that you may be able to start small and invest in additional hardware and software as your business expands.

Most POS solution providers list their pricing plans on their websites. Do your research to ensure that all the POS system costs are transparent.

Here are some of the most common fees:

  • Setup fees
  • Monthly upkeep fees
  • Fees for adding new users, products, or devices
  • Cancellation fees
  • Payment processing costs
  • Training package costs
  • Customer service fees

As a small business owner, price is likely a significant factor when choosing a POS system. A POS price comparison chart can make it easier to determine your costs.

Are You Sold on POS?

It doesn’t matter if your business is big or small — a point of sale system is a powerful tool that can help your business thrive.

In addition to enhancing your customer experience, increasing efficiency, and improving inventory management, POS systems can adapt to the changing needs of your business. Much more than a tool, the right POS system may be an essential part of achieving your business goals.

Susan Hamilton

I’ve always loved to write and have been lucky enough to make a career out of it. After many years in the corporate advertising world, I’m now a freelance writer—running my own show and contributing to Simply Business. Fun fact: I have three desks in my house, but I still do my best thinking walking in the woods.

Susan writes on a number of topics such as workplace safety, customer sales, and workers’ compensation insurance.