What is a POS system? A successful retail or hospitality business starts with a decent POS system. But what is it and how does it work? Written by Aimee Bradshaw Updated on 26 April 2022 Our experts We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality. Written and reviewed by: Aimee Bradshaw Senior Writer A point of sale (POS) system is a combination of hardware and software that allows your business to take card payments for your products/services from customers.Usually included with a POS system is a terminal (a flatscreen unit that hosts the software), then any additional equipment you may need – card machines, cash drawers, and barcode scanners.There are plenty of POS systems available for small businesses, which can make it difficult when choosing a provider. If you’d like assistance in finding the right system for you, our free POS cost comparison tool is here to help. For further information on what a POS system is and how it works, read on. Save by comparing POS costs Does your business use a POS system already? Yes No Find the right provider in just minutes In this article, we cover: What is a POS system? How does a POS system work? POS system benefits How much does a POS system cost? Choosing the right POS system for your business What is a POS system: roundup What is a POS system?From a software perspective, a POS system is the management hub of your business. Not only does it enable you to process transactions, but it offers you an array of tools on top, including:Sales analysis People managementStock managementTable managementOrder managementCustomer relationship managementWebsite integrationBooking system integration With your POS system enabling you to effectively manage every area of your business, you’ll be able to carve out a smoother road to success. Even better, you’ll find POS software can be tailored to your business’s industry. We’ve information on the best POS systems, grouped by industry (for example restaurant point of sale software), if you’d like to find out more.For retail business owners, a POS system will help you:Take transactions quickly – 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.Keep a close eye on stock levels – set your system up so it flags up when stock is running low on certain items. Check stock levels for customers on the shop floor. Analyse your sales figures – are there patterns in your sales figures? Work out when you should be running promotions, and figure out which items are selling well at which times. Manage your staff – set each staff member up with an account. They’ll be able to clock in and out, and you can accurately track commission and sales for each employee. Send targeted emails – collect customer email addresses, and use the inbuilt customer relationship management system (or an integrated one) to send deals and promotions. Sell using multiple channels – some POS systems enable you to set up or integrate them into an online store, so you have both bricks and mortar and online sales channels.Read our guide to the best retail POS systems for small businesses. Of course, this isn’t an exhaustive list of features; what's more, while some POS systems offer much more than what we’ve detailed, some offer less. With fairly basic POS systems and extremely sophisticated POS systems available, make sure you compare POS systems to ensure you’re purchasing the right one for your business. For hospitality business owners, a POS system will help you:Take transactions quickly – whether it’s at the table or tackling the counter queue, swift transactions make for efficient service.Keep tabs on your ingredients – set up your system so it automatically re-orders items when menu items and ingredients are running low. Manage your tables – emulate your restaurant layout on the screen, and assign reservations and bills to tables.Manage staff – ensure you have enough staff for each service, and track hours so you can split tips fairly.Set up loyalty schemes – provide your customers with cards that you scan each time they come in, or collect email addresses so you can tell customers about deals and promotions.Accept orders and bookings through your website – integration with website order and pay systems enables customers to order and book a table online.If you think your business would benefit from any of these tools, you can discover which point of sale system you should be investing in by using our comparison tool. We’ve put thousands of businesses in touch with the right provider for their needs. All you need to do is answer a few simple questions! How does a POS system work?These days, POS systems are more like little computers. Once hooked up to the internet, they provide a host of tools that help you to take transactions and manage your business. 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 menuOnce they’ve been inputted, 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 cashIf 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 saleIf 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 saleYou’ll be able to see how many card or cash sales you’ve taken in the back end of your POS system POS system benefitsOld school point of sale systems and cash registers are out. Now, it’s all about having an intelligent system that places payment taking and business management into one central hub. Here are the benefits of investing in a modern POS system: Earn more profitThere are lots of ways that POS systems help to increase profit; whether it’s taking more sales in a quicker time period, setting up upselling prompts for staff, or enabling you to expand your sales channels.Discover your recipe for successYour sales analytics will give you tonnes of information on how your business is performing. You can see how much you take in card payments, cash payments, and vouchers, identify which items are your most popular, and even spot seasonal 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 baseEmail 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 youWith 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 readymade 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. Some mobile POS system providers (like Square) offer free software, and supply a card machine that costs little under £30. All you need is a mobile phone or a tablet to host the software. Other POS system providers offer businesses a sophisticated software package for a set monthly fee, and integrate with third party payment providers. For example, Lightspeed’s most popular POS system package starts at £59 per premises, but integrates with Zettle by PayPal (previously iZettle) and SumUp, which incur their own charges. Where costs start getting a little complicated is in the fees associated with processing each transaction. The fees are set by your chosen payment provider and come on top of software and hardware costs. Zettle by PayPal offers an all-in-one POS and payments package that includes free point of sale software. The minimum costs associated with a Zettle by PayPal system are: £29 for a card reader1.75% per transaction Plus any POS equipment you may need However, if you were to go for a Lightspeed point of sale system and choose Zettle by PayPal as your payment provider, you would pay:£59 per month for the software£29 for the card reader1.75% per transactionPlus any POS equipment you may needIf this is all a little confusing for you, don’t worry. Our comparison tool makes finding POS system costs easy. Answer a few simple questions, which will tell us a little bit about your business, and we’ll then put you in touch with reputable POS system providers based on your answers. Choosing the right POS system for your business Swipe right to see more 0 out of 0 backward forward Square Lightspeed Zettle Epos Now Touchbistro Overall Score Based on our in-depth research and user testing 4.7 Overall Score Based on our in-depth research and user testing 4.4 Overall Score Based on our in-depth research and user testing 4.4 Overall Score Based on our in-depth research and user testing 4.2 Overall Score Based on our in-depth research and user testing 4.1 Pricing from £0 monthly cost£16+VAT – Square Reader Pricing from £39 per month (excl. VAT) Pricing from Zettle Go app – free£29 – card reader£189 – store kit Pricing from £25 per month Pricing from £65 per month 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?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?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. Small businesses have plenty of options when it comes to point of sale systems, but choosing a supplier that offers an integrated POS system and card reader is probably the easiest way to get the transactions coming in. Both Zettle by PayPal and Square are good examples of POS suppliers for small businesses: their software is fairly sophisticated and scalable, their hardware products aren’t too expensive, and their transaction rates are pretty good (if the total amount of transactions you take doesn’t surpass around £5,000 per month).We have a whole page dedicated to small business POS systems if you’d like to find out more. What is a POS system: a roundupSo there we have it – 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. Share this post facebook twitter linkedin Written by: Aimee Bradshaw Senior Writer Aimee is Startups' resident expert in business tech, products, and services. She loves a great story and enjoys chatting to the startups and small business community. Starting her own egg delivery business from the age of 12, she has a healthy respect for self-starters and local services.