How to set up and use a POS system: small business guide

Getting a Point of Sale (POS) system up and running involves setting up the hardware, configuring the software, adding your products and inventory, and testing payments before serving your first customers.

From there, you’ll need to get to grips with the POS software, including processing sales, managing inventory, setting up employee permissions, generating reports, and customising settings to match your business needs.

Our guide will take you through this whole process, including how to use hardware and software, what makes a good POS system, and which features are crucial for retail and hospitality businesses.

How to set up a POS system

POS systems can vary, so you’ll need to read the instructions carefully. However, these are the general steps for setting up:

1. Assemble and connect the physical hardware

First, you’ll need to set up your tablet (iPad/Android) or terminal on the counter. From there, plug in any additional peripherals you have, such as the cash drawer (usually connected to the receipt printer via an RJ12 cable), barcode scanner, and card reader (via Bluetooth, Ethernet, or USB). Next, connect the main terminal to your secure WiFi or local Ethernet.

Note: Before you set anything up, make sure you’ve got everything you ordered. Check the box and mentally tick off all the hardware and cables, etc. If anything is missing, contact the provider.

2. Install software and configure account settings

Once your hardware is set up, download your POS provider’s software (such as Square, Shopify POS and PayPal Point of Sale) on your terminal device. Proprietary hardware (like Clover or Toast) already comes pre-loaded or pre-configured with the company’s specific software. Next, log in and configure core business settings (business name, store location(s), sales, tax rates, and currency) and use the app settings to connect and configure your external hardware, including receipt printers, card readers, and barcode scanners.

3. Load inventory or menu items

This step depends on whether you’re running a retail or hospitality business.

For retail businesses, this step involves importing your product catalogue through a CSV file containing item names, SKUs, barcodes, prices, stock quantities, and variants (size, colour, etc). For hospitality venues, you will need to build your business menu layout with categories, item prices, modifier groups (like extra cheese, no tofu, etc.) and kitchen display routing.

4. Link payment processor and run test transactions

In this step, you’ll need to link your merchant account to enable credit, debit, and contactless (Apple Pay/Google Pay) processing. Before taking payments from your first customers, put the system in “test mode” or process a £1 real transaction and immediately refund it. This will help verify whether the card reader responds, the receipt prints, or the cash drawer pops open.

5. Set up staff permissions and train your team

If you have staff, you’ll need to create individual operator PINs or logins for each employee to track sales and clock-in/clock-out times. You’ll also need to assign specific role permissions (such as restricting refunds, discounts or inventory adjustments to managers) and train staff on opening/closing cash registers, processing returns, applying discounts, and handling offline mode.

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While this is a general guide, there are lots of POS systems available, and they can vary quite widely – from advanced setups to systems that just need an iPad and a card reader. So, you might not need to follow all these steps to get going.

To learn more, check out our guide to the best small business POS systems.

How much do POS systems cost?

The cost of a POS system ranges from £0 upfront to over £1,500+ for hardware, plus £0 to £150+ per month for software. The total cost is made up of three components: hardware, software, and payment processing fees.

How much does POS hardware cost?

The cost of hardware depends on the type of equipment required, the number of checkout stations you need, and the level of functionality your business needs. Here’s a quick breakdown of the kind of costs you can expect:

• Basic card reader: £19-29 + VAT (e.g. Square Reader and PayPal Reader)
• Handheld terminal (all-in-one): £149-£250+ (e.g. Square Terminal, PayPal Terminal, Clover Flex)
• Complete tablet/countertop setup: £250+£800 + VAT (includes iPad/tablet stand, cash drawer, thermal receipt printer, barcode scanner)
• Dual-screen full enterprise station: £600-£1,500 + VAT (e.g. Square Register and Clover Station Duo)

How much are software subscriptions?

You can get POS software subscriptions from £0 per month, such as free plans with Square, SumUp and PayPal POS. However, for more advanced features, you will need to pay for a more premium plan.

For example, if you’re looking for more advanced inventory, multi-channel operations, staff and floor management and deeper analytics, a mid-tier retail/hospitality software plan will cost you around £29-£79 per month.

However, if you want the most premium retail and hospitality features – such as high-end kitchen workflows, enterprise-level inventory control, advanced marketing, customer relationship management (CRM) and custom integrations – you can expect to pay approximately £75-£200+ a month.

How much are processing rates?

Card processing rates – otherwise known as transaction rates – are charges you pay to the POS provider each time a payment is processed. Pay-as-you-go providers like Square, SumUp and PayPal POS will only charge transaction rates in exchange for their free plans.

The typical card processing rates you can expect are 0.4%-1.75% for in-person transactions (chip & pin and contactless), 1.4%-2.5% + 15p-25p for online sales, and 2.5%-3.5% + 15p-25p for manual/keyed in transactions. However, your specific rate ultimately depends on which provider you go with.

How to use a POS system

Using a POS system day-to-day usually boils down to three main stages: starting your shift, processing customer transactions, and closing the register at the end of the day. Here’s how it typically works:

• Clock in and open shift: tap your employee PIN or swipe your staff ID card to log into the terminal. If you’re handling cash, make sure to count it in the drawer and enter that exact starting amount into the system.
• Ring up items: you can do this either by aiming the handheld scanner at the barcode or tapping category tiles on the screen (like Beverages > Iced Coffee). This also involves adjusting the quantity of the item or adding modifiers (like “oat milk”, “no onions”, “size medium”, etc.)
• Apply discounts and loyalty (if applicable): for loyalty, search the customer’s phone number or name to attach their loyalty account. Select promo buttons or custom discount options (like a 10% student discount) before proceeding to checkout.
• Collect payment and issue a receipt: tap the “Pay” or “Checkout” button and select the customer’s payment method (card, cash, gift card, etc). Once payment is accepted, print, email, or text the receipt based on the customer’s preference.
• Close register and end shift: run a “Shift Close” or “Z-Report” on the terminal and count all physical cash in the drawer, subtract your starting float, and enter the remaining total into the system. The POS will calculate any discrepancy (Over/Short) and lock your register profile for the day.

How do restaurants use POS systems?

Whether you’re running a pub, casual dining outlet or fine dining restaurant, a POS system acts as the central point that connects front-of-house service, back-of-house kitchen preparation, and back-office management.

Aside from processing payments, restaurant businesses also use POS systems for:

• Visual table and floor mapping: real-time visual tracking of occupied, open, ordered, or paid tables across different dining areas.
• Coursing and fire controls: sends orders to the kitchen in rounds (starters, mains, desserts) or manually holds/fires courses when tables are ready.
• Tab and bar pre-authorisation: opens customer tabs with an initial card swipe without keeping physical cards behind the till.
• Kitchen Display System (KDS) routing: automatically sends items to specific screens (such as the kitchen or bar) with prep timers and ticket colour coding.
• Bill splitting: allows staff to bills evenly by specific seats or by individual items directly at table-side handheld terminals.
• Timecard and clock-in tools: tracks staff shift start/end times, manages breaks, and allows managers to set up role-based system permissions through employee PINs.
• Recipe costing and depletion: deducts raw stock amounts (such as grams of meat or ml of liquor) per dish to track real-time stock levels and waste/shrinkage.

To learn more about how a POS system can help your restaurant business, check out our rundown of the best POS systems for restaurants.

How do retail businesses use POS systems?

In retail, a POS system is what connects inventory tracking, customer checkout, store operations, and backend ecommerce channels.

The core ways retailers use POS systems are:

• Instant SKU lookup: cashiers scan product barcodes or enter SKUs manually to pull up item descriptions, prices, and applicable tax rates.
• Variant and matrix handling: supports complex catalogue groups, such as size, colour, and materials under a single parent item.
• Promotions and discounts: automatically applies mix-and-match discounts (like “Buy 2 Get 1 Free”), promo codes, or automatic clearance markdowns at checkout.
• Real-time stock updates: every item scanned at checkout is instantly deducted from stock counts to prevent overselling across both physical and online stores.
• Low-stock alerts and purchase orders: generates purchase orders automatically when stock drops below a pre-set threshold.
• Shopper profiles: captures customer emails, phone numbers, and purchase histories at checkout to build unified customer profiles.
• Omnichannel returns: processes returns or exchanges in-store for items originally purchased online, automatically restocking inventory.
• Loyalty and digital receipts: collects points per purchase and offers digital receipts via email or SMS.

To find out more, check out our top picks of the best POS systems for retail businesses to find the best match for your business.

What hardware is needed for POS?

The exact POS hardware you need depends on the size and nature of your business.

For example, startups and small businesses would be best starting with an all-in-one iPad POS like PayPal Point of Sale. On the other hand, more established businesses will probably need at least some of the equipment listed below:

• EPOS touchscreen (either via tablet or separate unit)
• Cash drawer
• Card machine
• Receipt printer
• Barcode scanner

Additional hardware may be required in certain industries, such as a self-service POS tablet for casual dining outlets.

What’s the difference between POS hardware and software?

The difference between hardware and software is that hardware refers to the physical equipment that you use, whereas software refers to the programs you run on the equipment.

Fundamentally, software runs on hardware, and neither can be effectively used without the other.

Conclusion

Overall, a POS system is much more than something to process payments. Instead, it’s something that’s essential for managing sales, inventory, employees, and customer experience.

When setting up your POS system, this requires careful installation of the hardware, configuring the software, adding products/menus, connecting payment processing, and training staff to use the system effectively.

And while initial costs can vary depending on hardware, software subscriptions and transaction fees, the right POS system can improve business efficiency, reduce errors, provide valuable insights, and create a smoother experience for both employees and customers. It all comes down to choosing a system that best matches your business needs, so that you can simplify your daily processes and run your business as smoothly as possible.