What is a POS system?

If you want a combination of hardware and software that lets your business accept card payments for your products or services, you need a point-of-sale (POS) system.

A POS system usually includes a terminal (a flat-screen unit that runs the software), plus any additional equipment you may need, like card machines, cash drawers, and barcode scanners.

The right solution will depend on the type and size of your business, as well as how you take payments. Below, we’ll share everything you need to know about POS systems, including how they work for different businesses, the typical costs, and how to choose the right system for your business.

What is a POS system?

A POS system is a combination of hardware and software that businesses use to take customer payments.

But a POS system can do much more than simply take payments. Modern solutions can help you manage your entire sales process from one place. Depending on the system you choose, you can track inventory, manage products and prices, process refunds, create discounts, manage staff, and generate detailed sales reports.

Many POS systems also connect with other business tools, such as accounting software, customer loyalty programmes, ecommerce platforms, and payment providers. This can reduce the amount of manual work involved in running your business and give you a clearer view of how your business is performing.

How does a POS system work?

A POS system works by converting customer order items into a digital transaction, securely transmitting payment data to a processing network, adjusting inventory levels automatically, and logging the sale in back-end reporting software.

Your POS software works in conjunction with a card machine, and the transaction process runs a bit like this:

• Input the customer’s items into the system – they can be scanned or selected from a menu
• Once they’ve been entered, store the sale if it’s part of a bill, or total the sale and select whether the customer wants to pay by card or cash
• If they pay by cash, enter the total amount. The cash drawer will then open. Give them any change they require, and the sale will be stored as a cash sale
• If they pay by card, the amount is either transferred to the card machine, or you input the sale amount into the card machine. The sale is then stored as a card sale
• You’ll be able to see how many card or cash sales you’ve taken in the back end of your POS system

Note: If you opt for a cloud-based POS system, don’t worry if you lose internet access, as they can handle offline transactions by storing sales data locally on your device and automatically syncing it to the cloud once your connection returns.

What key POS features do retail businesses need?

For retail businesses, a POS system can help connect different parts of the sales process, from scanning a product to processing payment and updating stock. Some common features include:

• Quick transactions: a simple user experience means you can select items on the system, enter item price and/or scan items, and take payment in just a few taps.
• Inventory tracking: automatically records stock movements as products are sold, returned, received, or adjusted.
• Sales analysis: the POS system can turn sales data into reports and insights that help retailers identify trends and make informed decisions.
• Staff management: you can set each staff member up with an account so they can clock in/out and accurately track commission and sales for each employee.
• Targeted emails: collect customer email addresses and use a built-in or integrated customer relationship management (CRM) system to send deals and promotions.
• Multi-channel selling: some POS systems enable you to set up or integrate them into an online store, so you have both brick-and-mortar and online sales channels.

Read our guide to the best retail POS systems for small businesses.

What key POS features do hospitality businesses need?

A POS system for hospitality can manage sales and payments in businesses like restaurants, cafes, pubs, bars and hotels. Unlike a basic POS, a hospitality system offers more specific features, including:

• Inventory tracking: monitor stock levels and track ingredients or products as they are used and sold.
• Table management: view tables, check their status and assign orders to specific tables or seats.
• Order management: take orders, add modifications and send them to the appropriate preparation area.
• Kitchen management: send orders to kitchen display systems (KDS) or printers so kitchen staff can see what needs to be prepared.
• Menu management: add and update menu items, prices, modifiers and availability.
• Staff management: ensure you have enough staff for each service, and track hours so you can split tips fairly.
• Sales reporting: analyse revenue, popular menu items, busy periods and other sales information.
• Discounts and promotions: apply discounts, offers and promotional pricing to orders.
• Online order bookings: integration with website order and pay systems enables customers to order and book a table online.
• Bill splitting: divide bills between customers or different payment methods.
• Customer management: store relevant customer information and support loyalty programmes where available.
• Online ordering: some systems can connect with online ordering and delivery platforms (such as Deliveroo and Just Eat).

Read our guide to the best hospitality POS systems for small businesses.

What are the benefits of POS systems?

The main benefit of a POS system is centralisation— unifying payment processing, inventory control, staff tracking, and real-time sales reporting into a single platform to boost efficiency and profitability.

Here are the benefits of investing in a modern POS system: 

Earn more profit

POS systems increase profit margins by accelerating transaction speeds, automating upselling prompts for staff, and integrating multi-channel sales.

Discover your recipe for success

Built-in POS analytics track sales volume across card, cash, and voucher transactions, identifying top-selling items and seasonal revenue trends.

Become more cost-effective

Whether it’s getting enough stock in to avoid wastage or missing out on a sale, managing your staff so you always have just the right amount of people on shift, or being completely on top of your accounts, a POS system puts you in charge of your incomings and outgoings.

Increase your customer base

Email marketing, loyalty schemes, setting up customer accounts – these are just some of the ways you can use your point of sale system to increase your customer base, as well as keep your loyal patrons.

Create a business hub that works for you

With electronic point of sale systems, you have the flexibility and freedom to create a management hub that offers the tools you need to run a successful business. You can choose which apps to integrate or select a ready-made package for a set monthly cost.

How much does a POS system cost?

The cost of a POS system depends on the provider and the hardware and software features you require.

For a small business, a basic setup might consist of a tablet or POS terminal and card reader. For example, Square offers free software and a card reader that costs £19 + VAT. All you need is a mobile phone or a tablet to host the software. 

Meanwhile, larger retailers and hospitality businesses may need several terminals, cash drawers, receipt printers, barcode scanners and other equipment.

The main costs to consider are:

• POS hardware: you may need to purchase or rent terminals, card readers, cash drawers, receipt printers, barcode scanners and other equipment.
• Software: some providers charge a monthly or annual subscription for access to their POS software and features, while others (like Square and SumUp) offer free plans and you only have to pay processing fees.
• Payment processing fees: a fee is typically charged when a customer makes a card or other electronic payment (this may be a percentage of the transaction, a fixed fee, or a combination of both).
• Setup and installation: more complex systems may involve additional setup or installation costs.
• Additional features: advanced functions like inventory management, employee management, loyalty programmes, online ordering or multi-location support may cost extra.
• Integrations: connecting the POS to accounting, ecommerce or other business software may involve additional fees.

Contract lengths and hidden fees

It’s important to know that some POS solutions come with contracts for a set period. For example, Epos Now requires a 12-month minimum term for their software licenses, while Clover typically offers 18-to-36-month contracts for its services.

Entering a contract means that you are locked into the agreement for a set amount of time, and you will be charged an early termination fee if you decide to leave or switch providers before the agreed end date.

Meanwhile, other hidden fees to be aware of are:

• Setup and installation fees: charges for setting up the POS system, configuring software, or installing hardware.
• PCI compliance fees: some providers charge separate fees for PCI compliance services or non-compliance.
• Chargeback fees: you may be charged when a customer disputes a card transaction, even if the dispute is resolved in your favour.
• Refund fees: some providers don’t return the original processing fee when you refund a customer.
• Payout or settlement fees: there may be charges for transferring funds to your business bank account, particularly for faster or instant payouts.
• Additional user or location fees: adding employees, registers, tills, or separate business locations can increase your monthly costs.
• Integrations and add-ons: connecting accounting, inventory, loyalty, CRM, or ecommerce software may require paid integrations or additional subscriptions.
• Equipment replacement fees: lost, damaged, or unreturned hardware can result in additional charges.

How to choose the right POS system for your business

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		Pricing from	Transaction fees
SPONSORED	BEST OVERALL
Epos Now	Square	Shopify	Clover	SumUp	Toast	Lightspeed	takepayments
Hardware: from £15 per month Software: £358 (upfront)	Hardware: from £19 + VAT Software: from £0	Hardware: from £52 Software: from £25 per month £1 per month for the first three months	Hardware: from £450 + VAT Software: Currently from £9.99/month (18-month contract)	Hardware: from £15 + VAT Software: from £0	Hardware: quote-based Software: from £80	Hardware: From £49 Software: from £75 + per month	Hardware: quote-based Software: included in the hardware cost
From 1.7% per transaction	From 1.4% + 25p to 2.5% (UK cards)	From 1.3% + 25p	Quote-based	From 1.69% to 2.95% + 25p	Quote-based	Quote-based	Quote-based

POS systems aren’t a one-size-fits-all solution, and you’ll want to consider the following when choosing the best POS system for your business:

• Software features: does it offer the tools you need for your business right now?
• Scalability: is there the option to expand or upgrade your software package as your business grows? 
• Hardware: does your chosen POS system integrate with all the hardware you require?
• Transaction fees: are the payment processing fees cost-effective for the total amount of the payments you process?
• Software fees: is the package you’re paying for cost-effective, or would you be better off with a cheaper or more expensive one?
• PCI Compliance & Security Standards: does the POS system meet the latest PCI DSS requirements and offer security features like encryption, tokenisation, secure payment processing, user access controls and fraud protection?

Another way to look at whether a POS system is right for your business is to assess its suitability in relation to the size of your business. 

Flat-rate payment processors like Square and PayPal Point of Sale are most cost-effective for small businesses that process less than £5,000 per month in card sales.

Flat-rate providers like Square and PayPal Point of Sale are most cost-effective for businesses processing under £5,000 per month in card payments.

Summary: Choosing the Best POS System

POS systems are incredibly useful pieces of equipment that provide you with the necessary tools to effectively manage your retail or hospitality business. 

There are lots of different types of POS systems available – from basic fixed systems to sophisticated mobile POS systems – so choosing the right one is all about recognising your business needs.

When choosing a POS system, think about its scalability, integration potential, and cost-effectiveness before you buy. And if you’re stuck, use a comparison tool to help you discover the best fit for your business.