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Retail: Operations

What is a POS system?

By Alireza Behrooz on August 16, 20174 minutes read

Point-of-sale system — it’s a term that sometimes creates confusion, but also a vital component of your business. If you want to understand your sales and get them growing, you need to pick the perfect POS. So let’s walk you through the basics and help you make the right decision.

A POS system does so much more than accepting payments. It helps you make smarter marketing decisions, improve inventory management and more.

A point-of-sale system, often abbreviated to POS, is any system that registers sales and accepts payments. Some of the confusion around the term derives from the fact that a POS isn’t one thing.

It can actually be comprised of three components:

1. The hardware

Generally known as the POS terminal, the hardware can include a card reader that accepts major credit cards and contactless payments as well as a cash drawer, receipt printer and a scanner for barcodes.

2. The software

The software is either a computer program or an app that organises your stock into a product library, registers each sale and contains features for reporting, inventory management, customer engagement tools and more.

3. The link between your counter and the bank

The point-of-sale-system routes the funds into your bank account when registering the payment – at the point of sale.

In short, a POS system allows you to take payments, make refunds, apply discounts and track stock. A good system will simplify your daily operations and even provide feedback that enables you to make smarter long-term decisions.

Your point-of-sale system is the link between your counter and your bank account and simplifies the accounting process.

How is a POS different from a cash register?

One could argue that a point-of-sale system is like a smart cash register. Not only does it record every single sale – no matter whether your customer pays with cash, card or invoice – but it continuously records how much each product is selling and lets you know when you’re running low on stock. A good point-of-sale system can also make it easier to schedule shifts for employees and give you input on how to improve your marketing.

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Finally, old-school cash registers don’t export information digitally — they rely on printed receipts as well as printed X and Z reports at the end of the day, which then have to be consolidated manually. A modern point-of-sale system does all of these things automatically and with no mistakes, so it’s crucial for better bookkeeping.

Did you know?

… that the first POS was a simple money box. Over the years a cash register was added, and then came barcodes and scanners, so shopkeepers no longer had to memorize the price of individual products.

IBM can be credited with inventing the first modern POS system back in 1973 with its IBM 3650 and 3660 store systems. These kickass machines were basically mainframe computers and were installed in department stores and supermarkets in California and in New York and New Jersey from 1974 onwards.


Don’t miss How to choose the best POS system for your small business – a bunch of hands-on tips that’ll make your decision process easier!

Alireza behrooz Alireza Behrooz Product Manager at iZettle

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