What Is Point of Sale Software? A Checklist for Choosing the Best POS for Your Business

what is pos software

Point-of-sale (POS) software is constantly evolving. Clunky cash registers alone can’t keep up. Brick-and-mortar retailers are adopting leaner systems that operate on mobile devices in favor of complicated setups that cost thousands of dollars.

But it’s not just retail stores that are interested in POS systems—online store owners who sell at craft fairs, trade shows, and farmers markets are also in need of inexpensive and easy-to-use point-of-sale solutions.

So, what exactly is point of sale software, how do you know if you need it, and how do you choose the right tool for your business?

What is point-of-sale (POS) software?

Point of sale software is what brick-and-mortar retailers use to conduct sales in person. It's sometimes a cash register, computer, or even a tablet where cashiers input products, tally the cost, and conduct the financial transaction. Most POS software will also communicate with inventory levels to keep everything in balance.

A lot of big-box stores have wildly complex and expensive POS solutions, some of which were custom built for their needs. Independent retailers are moving away from these traditional POS systems and toward cloud-based point-of-sale solutions.

Types of POS software

There are two main types of POS software: on-premise and cloud-based. On-premise POS software requires you to be on location to use it. Terminals are the most common on-premise POS. Cloud-based POS software offers more flexibility, as you can use any connected, compatible device to access the dashboard. Cloud-based POS software is becoming more mainstream—the market was valued at around $1.29 billion for 2019, with an expected growth rate of more than 21.38% through 2026.

A cloud-based POS allows you to conduct sales and check in on your business even when you’re not at the store. You access it directly from the internet, and it’s often compatible with most POS hardware (cash drawers, printers, etc.) and other tools in your tech stack. This is great if you’re a small business that sells in a store and online along with the occasional in-person event.

When you use a cloud-based POS and link it to your Shopify store, your inventory automatically adjusts, helping you mitigate costly problems like stockouts. Cloud-based POS systems are also typically less expensive and more convenient than a tethered on-premise solution.

There are other types of POS software that fall into one or both of the above categories:

  • Mobile POS (mPOS): A mobile point-of-sale can move around inside or outside a store. Store owners can take transactions from a central point of purchase, like a traditional checkout counter or cash register, or wherever they need it to be. To take transactions on the go, retailers often use hardware like a tablet or smartphone to process transactions. Best for: Pop-up shops; increasing in-store conversion rate
  • Tablets: A tablet POS can be both mobile and docked to a station. These POS systems run on Android tablets or iPads, acting as either the main POS or supplementing your central POS station. This is also a mPOS. Best for: Selling products with lots of details, features, and/or use cases; collecting lots of customer data at the point of purchase; self-serve options; pop-up shops and event sales
  • Desktop: POS systems that run on a desktop computer are typically on-premise solutions docked to a checkout station. They’re bulky but often more powerful and reliable, depending on the hardware you choose.
    The main POS station in a permanent brick-and-mortar store; businesses that want to add mPOS in addition to their desktop setup
    Self-serve kiosks: Self-serve kiosks are common in food-based businesses, especially for quick-service restaurants and fast casual dining. This type of POS can drive a 15%–30% increase in average check size. They also work in retail environments. Best for: Food-based businesses; reducing lines and wait times; digitally savvy customers
  • POS apps: Depending on the POS, there are a few point of sale apps to choose from. POS apps work with your hardware and other compatible devices to enable you to access your data and manage business operations. Best for: Businesses that want flexibility and customizability without needing lots of technical resources or budget
  • Open-source POS: Open-source software allows companies to use their source code to build custom solutions with their platform. You can build your open-source POS system internally or with external collaborators. Best for: Enterprises with lots of technical resources; highly unique POS needs
  • Multichannel POS: A multichannel POS can integrate with various commerce channels, an increasingly important capability. These channels include your own website, third-party online marketplaces, your store, pop-up shops, event sales, wholesale, social media, and more. Best for: Ecommerce merchants who do or plan to sell in-person; multichannel online brands
  • Retail POS: A retail POS has features tailored to a brick-and-mortar business selling products. These features could include inventory management, forecasting, and multichannel selling. Best for: Pop-up shops; permanent brick-and-mortar stores in a traditional retail environment
  • Restaurant POS: Restaurant POS systems are designed with food-based businesses in mind. Specific features might include menu planning and costing, ingredient-level tracking, dish customizations, and self-serve ordering. Best for: Food-based businesses (fast food, casual, quick-serve, sit-down, etc.)

Components of a POS system

There are other pieces of hardware that can complement your POS setup:

  • Barcode scanner: In addition to scanning barcodes, you can also use some scanners to add discount codes. There are 1D barcode scanners that use the traditional bar code, and 2D barcode scanners that can read QR codes.
  • Cash drawer: Unless you only process cashless payments, you’ll need somewhere to put the cash customers use to pay for your products. The cash drawer is a safe, secure place to organize bills.
  • Credit and debit card reader: This piece of hardware can read debit and credit cards. There are several ways to read a card, including swipe, tap, and EMV chip. You need this for payment processing so you can receive the funds from the customer’s bank.
  • Receipt printer: These aren’t always essential, especially if you use Shopify POS, because you can send email receipts, but a printer can connect to your POS and spit out receipts on the spot.
  • Label printer: There are some instances where you’ll need to print a label—ship-from-store, for example. With a label printer as part of your POS setup, you can do that on the spot.
  • Scale: If you sell products by weight, you’ll need a scale to be able to determine how much to charge customers. Some scales connect directly to your POS for a seamless checkout.

What does a POS system do?

Modern POS systems offer far more functionality than simply administering transactions. They can complete other business functions, as well as inform important business decisions, including:

  • Managing inventory across all locations, both online and offline
  • Providing sales metrics and reporting
  • Managing customer data effectively
  • Improving in-store sales
  • Adapting to business needs with customizations

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Managing inventory across all locations, both online and offline

Whether you have inventory at your storefront, pop-up shop, or warehouse, keeping accurate counts across the board is a tricky (and sometimes tedious) task. Inventory is one of your largest expenses as a retailer, and you need a simple way to manage it. That means having the right products in the right place at the right time—and a POS that helps you achieve that goal.

A modern POS system should help retailers manage inventory anywhere you keep your products. Not only does this level of inventory management make tracking easier, but fulfilling orders is quicker when you know how much of a product is at a given location at any time.

With a POS, you can easily monitor stock counts across all your stores, while keeping customers happy by avoiding stockouts and automatically ceasing sales of products when inventory runs out. Accurate stock counts streamline ordering from vendors so you always have inventory in stock wherever your products are selling best.

Complete visibility of your inventory across all locations also makes it easier to move stock from one place to another (e.g., from warehouse to storefront) when you run low on a product. And it’s simpler to create purchase orders and accurately create your demand forecasts.

Providing sales metrics and reporting

A POS is useful for far more than processing transactions. You also can use crucial information from your point-of-sale solution to make data-informed decisions about your entire business.

Modern POS systems make it painless to see analytics across every channel in your retail business, both individually and as part of your business as a whole. The ability to break down and filter sales data this way can often shed light on what’s working—and what isn’t.

So, when you’re assessing a POS system, ensure you can easily track the following:

  • Data for both in-store and online sales
  • Sales broken down over time (number of sales by day, week, month, etc.)
  • Sales per employee
  • Sales per channel (across all stores and for each location)
  • Staff activities broken down by employee
  • Product reports (to see what’s selling and what’s still sitting on shelves)
  • Number of orders (broken down by various stages of fulfillment)

Easy, intuitive access to this kind of data can help you make better decisions and understand the overall health of your business.

Managing customer data effectively

A POS should also help you easily collect, track, and manage customer information. Access to these details can help you better understand your ideal customers and identify your most loyal shoppers.

When evaluating your shortlist of POS contenders, make sure that your top choice helps you manage the following:

  • Customer profiles. Collect contact details to build in-depth profiles of your customers to help you learn more about them and their shopping habits.
  • Customer order histories. Quick access to a customer’s order history can help you effectively cross-sell and upsell by offering on-the-spot, tailored product recommendations based on past purchases.
  • Customer loyalty programs. A POS should give you access to your loyalty program across all sales channels, whether someone buys online, in-store, or elsewhere.

Improving in-store sales

The traditional shopping experience has changed, and retailers have to meet the ever-evolving demands of customers in order to compete. But a POS system can help you keep up with a shifting industry.

The right POS features can help you appeal to the empowered shopper and make more sales. For example, use your POS to stay in touch with customers and keep your products top of mind after they leave your store. Sales associates can email customers a list of items they were interested in but didn’t purchase while in-store, so, when they’re ready, the customer can buy those items via a feature like Shopify POS Email cart.

Providing a variety of shipping options is another way you can serve your customers’ evolving needs. You can use a POS feature to ship a purchase to whatever address is most convenient for a shopper, whether it’s their home, their office, or another location—which can give you a competitive edge.

A POS that offers flexible shipping alternatives can minimize the need for returns and exchanges and keep sales strong. That’s why the following pickup, purchase, and delivery options are quickly becoming table stakes:

  • Buy online, pick up in-store. In-store pickup allows customers to buy online and collect their order from the retailer’s physical store or a third-party location. Thousands of stores are decreasing returns and selling more by letting customers check the size, color, and shape of their purchases before walking out—all while offering highly valued flexibility.
  • Home delivery. After customers buy products in-store—especially heavy or large products, like furniture—they don’t necessarily want to lug it home with them. As an added convenience, offer home delivery. Or, if an item isn't available in-store, but is at another location, customers can buy in store and have the item shipped to their home.
  • In-store returns/exchanges for items purchased online. Creating a hassle-free returns experience for customers can actually build loyalty. For example, if a customer wants to return a product they purchased online, they may want to make a return immediately rather than sending the product back via snail mail. Make it simple for them to visit your store to make the return.

This creates an opportunity for a friendly, well-executed staff response to potentially sell them additional products and, at the very least, build a more engaged customer relationship.

“We opened a retail location in order to allow customers to come into the store, see their products, and cultivate trust and long-term relationships. Shopify gives customers the option to buy online and pick up their items from our NYC store.”

Adapting to business needs with customizations

Your POS hardware and software should complement rather than conflict with your business and brand. Ideally, your hardware and software should be sleek, intuitive to use, and blend in.

After all, your brand and products should get the attention of customers—not your POS system.

When assessing a POS, also check for a robust app store. Using apps, you can customize your POS system to fit your unique business setup. App integrations can also help connect your POS with other handy tools that help you run your business (like marketing automation software, bookkeeping platforms, and invoicing tools).

If you know you’ll need some help with setup or personalization, check for a healthy partner network. With plenty of partners to choose from, it’s easier for you to hire an expert to set up your POS, maintain it, or help you customize it to fit your needs.

How do I choose a POS?

Here’s a quick list of keystone features to look for when purchasing a POS system:

  • Full visibility into your inventory across all locations, updated in real-time
  • Robust analytics and reporting capabilities
  • Quick access to customer profiles, order histories, and loyalty programs
  • Flexible payment, purchase, and delivery options
  • Flexible returns, exchanges, and store credits (e.g., buy online, return in-store)
  • Customizable with a robust app store to suit your unique business needs
  • Easily integrates with your business tech stack (e.g., email marketing, accounting, etc.)

Signs it’s time to switch your POS

You might have been using your current POS system for a while—it’s good enough, but you suspect there’s something better out there. There are a few surefire signs it’s time to shop around for a new option:

  • Inventory management is difficult and doesn’t automatically sync
  • Lack of payment options
  • No mPOS option
  • Customers can’t use online gift cards in store and vice versa
  • Staff management issues
  • Customizations require lots of technical resources

Inventory management is difficult and doesn’t automatically sync

Merchants that don’t focus their efforts on omnichannel sales are missing out on serious revenue opportunities. Customer behavior has evolved and it continues to do so in the COVID-19 economy.

A consistent, harmonized experience across all of your sales channels is what customers have come to expect. Shoppers don’t want excuses about out-of-stock items—they want a seamless buying experience, no matter where they get your products.

Regardless of where you sell, it’s important that your POS automatically syncs inventory across all channels. Not every POS system reconciles online orders, in-store inventory, and warehouse inventory, and that can create headaches both for your staff and for your customers.

Manually reconciling inventory across all the places you sell and store your products is tedious and prone to human error. When your inventory syncs automatically, you know exactly how much stock you have and where it is at any given time. It’s also easy to understand how well each product is selling and create purchase orders based on performance and updated stock levels.

With that information at your fingertips, you can prevent stockouts, easily move inventory from one location to another, and get a full picture of all your sales from one place. A POS that’s part of a unified commerce platform unlocks that kind of visibility.

That was the motivation behind fashion brand Assembly New York’s switch to Shopify POS.

Assembly New York

“Why [manage] two things when you could have just one?” says Ale Tarver, Assembly’s store manager. “If you’re selling online and using a POS from two different systems, why are you double checking your inventory? You’d have to manually adjust things, and that takes a lot of time.”

Lack of payment options

More customers than ever are using their smartphones to pay at checkout—whether through a service like Apple Pay and Google Pay or credit card details stored in a digital wallet.

According to a recent report, only 17% of global payments will be made using cash by 2022. Digital wallet usage is projected to go up to 28% during the same period, to hit 1.5 billion users. And consider the impact of the COVID-19 pandemic on top of that—it has accelerated the need for contactless merchant-customer interactions.

Digital wallet payments are undeniably convenient for shoppers and retailers—the tap-and-go option allows customers to leave their physical wallet at home and the speed helps keep queues under control.

When a point of sale doesn’t offer an option to accept digital wallet payments, you’re potentially leaving money on the table. While almost all POS systems can accept and process payments via cash and credit card, not all accept near-field communication (NFC), or “tap” payments (Apple Pay, Google Pay, tap debit/credit cards, etc.)

It’s also difficult for retailers to offer these convenient payment options for customers on their own. Dealing with banks or payment providers means you’ll need to sign lengthy contracts, pay exorbitant setup fees, and figure out confusing payment rates.

Rather than trying to detangle these complicated options, look for a POS that provides low transaction rates and predictable fees. A point of sale provider should be transparent about fees and automatically deduct them from each sale to eliminate lump-sum payments, so you know exactly how much you’ll be paid.

No mPOS option

More than 29 million people are expected to use mobile POS payments in the US in 2019, totaling more than $87 billion in transactions. Statista predicts that number will grow by 29.6% annually, closing in on nearly $246 billion by 2023.

However, not all POS systems are compatible with mobile devices, which can make it difficult or even impossible to accept mobile payments or process transactions anywhere other than your checkout counter.

The ability to move your point of purchase around is a simple modification that can revolutionize the shopping experience for your customers. Here are a few of the things a mobile POS can do:

Reduce checkout friction and ease pressure on employees

One of the biggest benefits of mobile POS hardware like the Shopify Retail Kit is that it helps point-of-purchase congestion. A mobilized POS lets you process transactions on the spot from anywhere in your store, which also enhances your customer service.

No one likes waiting in tedious checkout lines. According to a recent survey from Forrester, 32% of shoppers would abandon a long line to go elsewhere for a faster checkout experience.

A mPOS also supports your employees. Staff are better equipped to help customers, answer questions, and use their mobile device (powered by your POS system) to check inventory availability without running off to “look in the back.” It’s challenging to provide a high level of service when employees are tied to a checkout counter.

Easily transition from inquiry to sale

With a stationary POS, customers interact with one employee on the sales floor when they have a question and another when making a purchase. A single point of contact creates better rapport between sales associates and shoppers, enhancing the experience, increasing trust, and potentially leading to more sales.

Increase flexibility around when (and where) you sell

Retailers often need to get out into the community to sell beyond the confines of their storefront—customers like to interact with brands outside a brick-and-mortar store, from pop-up shops and pop-in stores to food trucks and public markets. To take advantage of these kinds of events and activations, you’ll need a flexible POS that allows you to sell seamlessly from anywhere.

Gather customer email addresses and go paperless

Brick-and-mortar retailers don’t have as many organic opportunities to collect customer information as ecommerce stores—but a mobile POS system can help with that. For example, customers can opt to receive an email receipt instead of a paper one. Your employees can input this info into a personalized customer profile via a mobile POS, giving you access to their email address and the ability to stay in touch after they leave your store. (It will also save you money—and a few trees.)

“50% of foot traffic in the store is new customers experiencing our brand for the first time. Since we capture contact details at point of sale, we can use email marketing and retargeting to continue serving customers online.”

Michelle Cordeiro Grant, LIVELY

Customers can’t use online gift cards in-store and vice versa

The gift card industry was estimated to be worth $160 billion as of 2018, and three-quarters of the volume in gift card program redemptions are still in physical cards, versus 25% for digital gift cards (or eGift cards).

Not all POS systems allow shoppers to use eGift cards in-store or to use physical cards online, which is frustrating for customers. But the right POS can offer the flexibility to allow customers to pay for purchases with gift cards anywhere they shop.

Staff management issues

Managing staff can be a retailer’s most time-consuming task. Your to-do list includes everything from creating schedules and monitoring performance to ensuring you have the right number of employees working at the right times.

Fortunately, a best-fit POS system can help retailers automate (or even eliminate) many employee management tasks from their list. Using your POS system, you can keep everyone accountable by creating staff logins and monitoring sales for each employee by tracking all orders and cash register activity.

With separate employee logins, you can also easily (and fairly) reward staff who are exceeding expectations. Retailers can see who is generating the most sales and who is lagging behind in meeting their monthly quota. With this information readily available, merchants can easily reward or praise star employees. Retailers can also provide help for those who may be struggling with sales or customer service.

Additionally, you can consult your POS data to inform staff schedules. Based on the number of transactions for a particular period, you can spot trends like peak busy hours and recurring lulls, then schedule accordingly.

A comprehensive POS will also have plug-and-play features to help you get more mileage from your system. For example, with Shopify POS apps like ClockedIn, you can pull up timesheets and get staff to punch in and out of their shifts.

Customizations require lots of technical resources

With Shopify POS, you can customize the platform and experience yourself—no coding needed. There are hundreds of apps that plug in seamlessly to help you build the tech stack you need to run your business. The main benefit is the ability to add (and subtract) functionality at will.

Nimble is the name of the game right now. Retailers need to be able to adapt quickly in today’s economy and that includes customizing your POS for new workflows, sales channels, payment methods, and more.

Michelle Cordeiro Grant from LIVELY explains that Shopify’s customizable platform allowed the company to create an online booking experience called a “fit sesh,” where women can fill out their personal details and schedule a time to come in for a bra fitting. Thirty percent of their sales now come from people who booked fittings online.

LIVELY

ENJOY EXCLUSIVE APP OFFERS: For a limited time only, Marsello, Endear, and Xero are offering exclusive offers and discounts for retailers who are new to Shopify POS.

Should you make the switch?

These are the essential questions you should ask before switching your POS system.

  • Does my POS automatically sync inventory across online and offline channels?
  • Does my POS accept digital wallet payments?
  • Is my provider transparent about fees?
  • Do I have low transaction rates?
  • Is my POS compatible with mobile devices?
  • Can my customers use online gift cards in store and vice versa?
  • Does my POS allow for multiple staff logins and monitor/incentivize sales accordingly?

If you answered no to a lot of these questions, it might be time to change POS systems.

The importance of choosing the right POS

Many single-store retailers still don’t have a POS system at all. And whether you’re just getting started or migrating from another tool, it’s critical to make the right choice so you find a system that can grow with your business.

Setting up your first point-of-sale (POS) system, or switching to a new one, can seem daunting. With a nearly endless array of options, specifications, and reviews to compare, researching which POS to use can feel as overwhelming as buying a car or a house.

Sure, finding the right POS software requires a lot of upfront research—but the return on your investment is worth it if you find the right fit. The homework involved requires far more effort than a typical purchase, but you have more to gain from choosing the right technology. A strong fit can make or break your customers’ experience.

Your POS needs to make sales, returns/exchanges, inventory management, and omnichannel retail as simple as possible. A synced, unified commerce experience goes a long way toward boosting your bottom line and giving your customers a hassle-free shopping experience across all sales channels, both online and in person.

What is the best POS software for a small business?

Not all POS systems are created equal. While we’re biased—we work hard to make the all-new Shopify POS the best solution for our merchants—every retail business has its own needs, and every business owner has to choose the POS that best meets those needs. The same is true for a small business POS system.

For small business retailers in particular, Shopify POS Pro is the best POS system. It has inventory management and analytics capabilities that are upgraded from the Shopify Plan. Plus it offers unlimited staff and registers, omnichannel selling features, and staff roles and permissions.

Shopify POS Pro

How to buy your POS

The most important part of finding the right POS is doing your due diligence, and that’s difficult when you’re running a business. A Quickbooks survey from 2018 showed that almost one-third of entrepreneurs work 50 hours per week, and another 11.8% work 60 hours per week.

It’s a hassle to switch tools that are integral to running your business, but with the right information, you’ll be ready to make the transition and reap the benefits.

Ask your network

A great place to start is by asking the people you already know and trust. This could be both internally and externally. Maybe you have an experienced employee who can make a recommendation—they already know the ins and outs of your business. Or, ask someone outside your company who has extensive experience with POS systems. They might be able to point you in the right direction to help you begin your search.

Check review sites

To understand how other businesses are using a particular POS, read through a few review sites. You can compare competing POS systems and get a better grasp of each one’s benefits and limitations from retailers who have firsthand experience.

Here are a few great websites to check for business technology and tools:

Shopify POS Merchant Maverick

Read corresponding case studies

For more details on how a specific POS system can help you succeed, try checking out a few case studies. These in-depth articles offer insights into individual business success stories, including accounts of how a POS drove better business results.

We’ve handpicked a few Shopify POS case studies to check out:

Get a demo

A demo can give you a sense of whether a POS will meet your business’s unique needs. It offers an overview of a particular point of sale and introduces you to its top-level features.

Scheduling a demo also allows you to take the POS system for a test drive and have any questions answered on the spot.

To try out Shopify POS, get in touch with our experts.

Check contract minimums

Look out for contract minimums, as some POS software requires merchants to agree to stick with their tool for X amount of time. This is limiting for a number of reasons, and it can lock you into a tool that isn’t right for your business. Instead, prioritize POS software that comes contract-free, like Shopify POS.

See it in the real world

As a final step in finding the right POS, go shopping. Visit some retailers and see how a POS system fares in the wild. Chat with business owners to get a firsthand understanding of a POS system’s best features and quirks.

Grow your small business with Shopify POS

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