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What is a POS system?

A successful retail and hospitality business starts with a decent POS system. But what are they?

In 2019, there were three million recorded point of sale systems in the UK – up almost 400,000 on the year before. This rise correlated with the move away from cash payments to contactless card payments – and with the pandemic further discouraging the use of cash, the need for a system that accepts and processes card payments will only keep rising.

From fixed point of sale (POS) systems that sit solidly on a countertop to mobile point of sale systems that enable restaurant staff to take payments at the table, the point of sale market is huge and varied. All of this raises the questions: what exactly is a point of sale system? And how can it help your retail or hospitality business flourish? 

On this page, we’ll answer the question ‘what is a POS system?’, shed some light on the different types of point of sale systems out there, and fill you in on how they have the potential to supercharge your business. 

And if you’d like assistance in finding the right POS system for your business, our POS comparison tool is always here to help. In 2020, we helped over one thousand businesses find the right POS system for their needs. We’re sure we can help you too – we just ask a few simple questions, and then we’ll send you quotes from a range of top suppliers. Easy!

Furthermore, a POS system is only one element of the payment taking process. If you’re on this page because you’re looking to start taking payments, you should also look at other elements of the process – including merchant accounts and payment gateway providers – so you have a full understanding of how a payment ends up in your business bank account.



What is a POS system?

A point of sale system is a combination of hardware and software. Usually, that means a terminal (a flatscreen unit that hosts the software), then any additional equipment you may think you’ll need – card machines, cash drawers, and barcode scanners are just some of the additional pieces of equipment that business owners may choose to invest in.  

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 management
  • Stock management
  • Table management
  • Order management
  • Customer relationship management
  • Website integration
  • Booking 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 for retail and the best POS systems for hospitality 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.

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 menu
  • Once 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 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

POS system benefits

Old 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 profit

There 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 success

Your 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 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 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 reader
  • 1.75% 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 reader
  • 1.75% per transaction
  • Plus any POS equipment you may need

If 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

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 roundup

So 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.


Aimee Bradshaw
Aimee Bradshaw

Senior Writer and Researcher

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.

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