An in-depth look: What is a point of sale (POS) system and how are they all different?

A point of sale (POS) system is a combination of computer hardware and software used by businesses to process orders, purchases, and transactions while managing and retaining customer, inventory, merchandise, and pricing information, while being able to generate insightful reports, and even marketing activities such as email campaigns, customer loyalty programs, and gift cards. Phew, what a mouthful.

The goal of a point of sale system is to boost productivity for your major operational processes and streamline the flow of information between appropriate entities.

By doing so, it reduces the burden of tedious day-to-day tasks for all involved and provides valuable information to enable businesses to make critical decisions accurately and confidently.

Ultimately these benefits will maximize your business’s profitability, improve customer AND employee retention/satisfaction, and reduce resource-draining operational inefficiencies.

Where do you use POS systems?

You have probably seen a POS system at retail stores, restaurants, movie theaters, gas stations, and generally speaking if you just visit any checkout line.

Although the term ‘point of sale’ refers to the act of conducting a sale and transaction, most point of sale systems offer many features that manage the operation and flow of information of an entire business through multiple departments.

Don’t let the lingo confuse you. Whether you hear it being called a point of sale system, retail point of sale system, retail management software, or POS software, they are all referring to the same thing.

To view an overview of our POS system’s features, see our NCR Counterpoint System overview page.

II. Defining the “system” in POS system

The hardware of a POS system typically consists of some touchscreen monitors (also known as terminals), along with a cash drawer, a receipt printer, a barcode scanner, and payment processing device (like a magnetic stripe card reader or EMV chip card reader). This is called a workstation.

More advanced hardware solutions such as mobile POS tablets allow sales associates and restaurant servers to ring up orders/tickets and process payments on the go.

In addition to the front-of-house workstations, businesses also use back-office PCs for operational tasks such as inventory management, purchasing, and reporting.

When it comes to types of point of sale systems available today, businesses often choose between cloud-based, on-premise (server-based), and one we’ll put in a category of its own, iPad POS systems (iOS).

A reliable point of sale system should have regular maintenance or updates on the software side, and 5 – 10 years is the average lifespan on the hardware side.

Are all POS systems built similarly?

Short answer: Not at all. There are many options today for POS software in terms of features, the degree of customization options, logical functionality and automation features, difficulty in technical setup, and learning curve in utilizing them.

They range from the simple user-friendly models (entry-level, typically cloud based) to those that require a longer learning curve (for businesses that need more functionality and automation).

Industry-specific point of sale solutions are typically segmented to retail and hospitality industries, in addition to focused solutions for wineries, gas stations, attractions, spas, and repair services.

III. Big Debate: Cloud-based, iPad, and “Traditional” POS systems

The modern web-based POS software can be run and supported on any computer with an internet connection and browser.

These types of POS systems are becoming more and more popular today as consumers favor more flexible pricing options (month-to-month billing) and do-it-yourself setup and training.

Benefits of cloud-based POS

The benefits to iPad and cloud-based POS systems is that they are usually easy to configure (do-it-yourself), have modern user interfaces (look prettier), and you can scale them quite easily (add more users as you grow quickly).

The simpler setup process, self-training, and modern look of today’s cloud-based systems are attractive to many business owners. The real question is, when something is NEW does it automatically make it better? I’ll expand on this below.

Cons of cloud-based POS

There are a few caveats to purchasing a cloud-based POS system, such as an iPad POS system like ShopKeep POS or Lightspeed POS. Although these systems are new and “modern,” it’s fallacious to think it automatically outperforms or is built smarter than systems that have been around longer.

iPad POS systems are typically designed for the masses and are considered entry-level systems. The software capabilities dictate that all industries and business types manage their operational workflows and data similarly. From our experience, this simply isn’t true.

Think about it, if a system is so “easy to use” that you can “set it up all by yourself,” then it must be very limited in features! It may get you from point A to B, but will it be flexible enough to not alter or hinder your operational processes?

If a business grows, so does the complexity of the operation. Is the POS system scalable enough to grow with your business? These are important questions to ask yourself when deciding.

In other words, cloud-based and iPad POS systems allow minor customization to functionality but may require many workarounds to circumvent the lack of flexibility and customization.

Bottom-line: If you have to modify the way you run your business so that it aligns with the POS system’s logical functionality, it’s probably in your best interest to look at more robust solutions.

Should I pay monthly for life or purchase outright to own?

Most cloud-based systems offer month-to-month at a reasonable rate per license, user, or workstation. This is attractive and comfortable for consumers today due to the ubiquity of software companies adopting the SaaS pricing model, and for businesses that do not have capital to buy out a system outright.

If you are to choose between buying and owning a system upfront, versus paying month-to-month, calculate the cost from a 5-year or 10-year projection (granted you plan to be in business longer than a few years).

If you calculate the total cost of ownership over 5 and 10 years, you’ll find that in most cases you end up paying double to triple the cost of an on-premise system in the long run!

Lastly, the fact is you will never own a cloud-based POS system, you are essentially renting the system for the lifespan of its use. In most cases, it is more financially feasible from an ROI perspective to buy outright, meaning you own the software for life.

In the long-run, this can actually lead to tens of thousands, and in many cases hundreds of thousands of dollars in savings versus paying monthly for life!

For example, if a system costs $10,000 per workstation with a lifespan of 10 years, and another costs $79/mo/workstation for the life of its use, in 10 years you will spend $24,000 ($79 * 12 months * 10 years) in total.

It’s simple math! From an ROI perspective, paying upfront is usually the fastest ROI due to the increased productivity the POS system should provide.

Banks own point of sale systems too

Another fun fact is many iPad based systems are owned by banks or the banks are the corporate sponsor of point of sale companies.

In most cases, the intention is to lock-in payment processing fees to the bank, to ensure that it goes through a merchant service that processes through the bank.

This equates to massive revenues for banks who take a percentage of every transaction the merchant processes. “Free” point of sale systems are notorious for being owned by banks. There is no such thing as free in business!

IV. On-premise or server-based POS System

An on-premise point of sale system requires a server installed and maintained at the location or headquarters of your store.

Typically, larger businesses with several workstations per store or busy transaction-heavy environments require a dedicated server to optimize processing power and networking capabilities. From a cost perspective, the business handles the cost of maintaining the server instead of paying a cloud-hosting company to do it.

In many cases, these systems are referred to as “traditional” or “legacy” point of sale systems due to their often less-than-spectacular user interfaces and time on the market.

The notion that these systems are obsolete in any way is inherently misguided and fallacious in thought for many reasons.

The myth surrounding “traditional” and “legacy” POS Systems

In technology, “newer is better” is an easy conclusion to jump to. In the case of point of sale systems, you should strongly reconsider. Point of sale systems like NCR Counterpoint are built by the longest standing global leader in consumer transaction technologies.

They have dedicated over a century of experience in R&D to build, improve, and keep their management systems current. Compare this to many cloud-based POS companies which are fairly new to the scene who are just still learning the ropes.

Think of it like hiring a new general manager. Would you hire a college student with a management degree but little work experience, or a seasoned worker with years of hands-on managerial experience in your industry?

A college graduate may have a textbook knowledge on how to manage an operation, but lacks the wisdom and charge you would find in someone with years of real-life experience.

The college student understands the principles of management, but they lack refinement and the ability to execute it in the work environment due to lack of experience. On the other hand, a seasoned worker has developed wisdom, expertise, and a methodology that took years to refine.

When it comes to choosing a POS system, reliability and existing capabilities should hold more weight in the decision making process than any other factor. The POS system you choose should ideally be the last one you ever have to purchase.

V. Conclusion and Summary

A basic point of sale system today should have…

Point of Sale
Inventory Management and Purchasing
Customer Relationship Management
Payroll and Employee Management
Reporting and Analytics
Accounting Features or Integrations

As you can see, point of sale systems can help you stay organized from an accounting perspective and keep you fiscally responsible.

However, not all software has the same features, technical requirements, and learning curve/ease of use. Because there are so many out there, you will probably run into many combinations of features.

This means that you are going to have to do your research and find the one right for you based on the individual and organizational needs of your business. In addition, do question the level of support you will receive for onboarding and setup, along with technical support provided.

If you plan to take the responsibility of setting up, training and servicing your own technical issues…you may end up wasting time and resources, making mistakes, upsetting your employees, and ultimately harming your business!

We’ve heard enough POS nightmare stories to know this is more often the case than not.

Have more questions? Call 888.881.1988 to speak with our consultants today or visit our contact us page.

By POS Highway Staff | August 9th, 2023 | Hardware, Point of Sale | 0 Comments

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