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What is a POS system? How does a Point-of-Sale work?

It doesn’t matter whether you run a restaurant, retail store, hotel, or coffee shop. Ultimately, your primary aim is to sell a product or service and get paid for it. If you’re new in the business world, you might have heard the word “POS” being thrown around.

But what is a POS system, and what does the term stand for? We look at these questions in this blog post to help you understand this critical requirement for any business.

Ready? Let’s take a closer look.

What is a POS system?

In short, the acronym “POS” stands for “point of sale” or “point of purchase”. The POS system is the place where a sale is being executed. In a shop, this can mean your hardware and your software combined in such a way that enables you to accept payments.

These hard- and software components can include a cash register, a barcode scanner, a POS terminal to accept payments, cloud software to help you organise your inventory and customer relationship management, and more. 

What are the origins of POS systems?

The original POS system as we know it today is not what it was 20 years ago when it first came to the market. It was initially a cash register that helped improve accounts and bookkeeping functions at various retailers in the US.

Since then, LCD displays and touchscreens, magnetic stripes, and computer or cloud-based technology have come to the fore, although James Ritty of Ohio in the US is credited as being the first individual to create the cash register over a century ago and ultimately, the beginning of the POS system.

How does a POS system work in practice?

It’s relatively simple – your customer chooses an item they would like to purchase, they arrive at the point of sale, the total cost of the sale is calculated, they hand you a debit or a credit card, or cash, although this is quickly becoming an outdated method with which to pay. The transaction then is processed and your payment is eventually complete.  

4 benefits of implementing a POS system

Now that you know what POS stands for, it’s time to look at some benefits it offers for your business: 

A positive effect on your company

Knowledge is power, and the more you know about your business, the better. Therefore, a POS system can come in handy. It can help you track sales, inventory, and total payments received.

This will enable you to keep track of stock, decide when you need to boost your inventory, determine which items are made for the most popular buys, and how much profit you made off them.  

Improved analytics and planning

Back to inventory again, a POS system helps you keep track of it effectively. You’ll also be able to pick up on any trends in the sales process, you’ll be able to analyse your incoming data and you will be better able to predict any future trends related to your business.

Increased business efficiency

Features like barcode scanners and credit card readers can help you improve your business’ efficiency. Barcode scanners, for example, can help you figure out which stock is selling faster than the others, ensuring you have enough on stock.

Meanwhile, a credit card reader can help you improve your business efficiency by enabling you to accept card payments easily, providing a modern and hygienic process that your customers would enjoy. 

Improved client communication

Your customers are the lifeline of your business, and you need to treat them well in order for them to be returning clients. At the point of sale, you can collect their information, such as email addresses, names, dates of birth, and tailor your upcoming offers, discounts, or sales. They’ll not only feel like valued customers, but that they have an incentive to shop at your store.

POS software

If you run an ecommerce store, you’ll definitely need POS software for your system. This will help you integrate the online solutions correctly into your store, and you’ll be much better equipped to accept payments from anywhere.

When it comes to software, make sure you choose a provider who offers you flexibility, affordability, ease of use, and constant customer support, and value-added features. 

An image of the ePOS system myPOS Hub

If you don’t have an online store, you’ll still need POS software for your business. This can come as apps such as a cash register app that helps you keep track of sales.

There are also hundreds of third-party apps available for you to manage your business well. All you need to do to use the software is to either sync it with your card terminal or POS device or integrate it with a tablet, smartphone, or computer. 

POS hardware

Some of the essentials related to the hardware of a POS system are:

Barcode scanner

Your barcode scanner can significantly ease your business operations, as it will ultimately help you in managing your inventory. You can integrate such scanners with additional software for optimal results. 

Cash drawer or cash register

While there’s been a trend towards going cashless, you still need to be prepared for cash sales. This is why you’ll need a cash drawer to keep all incoming payments safe. 

Receipt printer

Most times, printing receipts and invoices is a regulatory requirement and you’ll want to ensure that your ePOS system enables you to do this. Sometimes, you can print a receipt through your credit card reader, which is discussed in more detail later on. 


A monitor’s purpose is to show the product database, and it also helps with managing staff through clock-ins besides helping you view sales reports. 

Credit and debit card reader

This is an essential feature of such a system since an increasing number of consumers are making payments using contactless, magstripe, or Chip&PIN cards. Keep in mind that some card readers can function both as a barcode scanner and a debit/credit card reader.

Questions to ask when choosing a POS provider

If you’re ready to purchase a POS system, you’ll need to do some prior research. Here are some important questions you need to ask when choosing a payment solutions provider: 

  • What is the total cost of the POS system?
  • What type of hardware is required for the system to function optimally?
  • Can the POS system integrate with your existing software? 
  • What are the main payment methods which such solutions can accept?
  • Are there any hidden monthly or annual fees?
  • Is a binding contract necessary or can you pay on an as-you-use basis?
  • Will you get an instant settlement of all accepted funds?
  • How will you access funds which are accepted – will there be a free business card?
  • Will you have access to a merchant account with a free IBAN?
  • What kind of customer support can you expect to receive?

Final thoughts

Getting a POS system for your business will be a worthwhile investment, as this is a fundamental aspect of accepting payments. The core of your business revolves around receiving payments for products or services offered, and you need to consider offering your customers convenient ways of paying you.

Once you’ve asked your payment solutions provider the questions mentioned above, you’ll be in a better position to make a more informed decision because you’ll already know what is a POS system and how it works.

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