Point-of-sale (POS) systems help businesses accept and process payments as well as manage most aspects of operations, such as inventory, customer engagement, scheduling, accounting, and reporting. This guide will walk you through everything you need to know about POS systems and how to choose the right one for your business.
In this guide:
- What does a POS system do?
- How the right POS system can help your business grow
- What to consider when selecting a POS system
- How much does a POS system cost?
- More POS resources
What does a POS system do?
While the earliest cash registers trace back to shortly after the Civil War, the last few decades have seen a rapid evolution in financial services and business management technologies. POS systems can do more today than could have been imagined just 20 years ago.
The primary function of a POS system is to process credit and debit card payments, as well as store cash and checks. These systems also track sales and can generate reports to help you better understand trends and peak sales periods. In addition, nearly every POS uses your transaction data to help manage your inventory, letting you know when you’re running low.
Depending on which system you select, you may have access to a number of additional resources. For example, your POS system can help you with staff scheduling, online order management, customer engagement including loyalty programs and targeted marketing, and even games. While your POS might not be able to control room temperature or play your favorite music (at least, not yet), it can help with nearly every aspect of managing your business.
How the right POS system can help your business grow
Choosing a POS system can have a substantial impact—positive or negative—on your business. This is why it’s critical to take the time to do your research and determine the factors important to your business. Making the right choice when it comes to your POS can positively affect your business in three basic ways:
Business operations
Once your POS system is up and running, the management of your business should take less time and be more productive. Saving time on paperwork, accounting, inventory management, and staff scheduling frees you up to focus on growth, strategy, and innovation. A powerful POS interface like the Clover Dashboard gives you everything you need to check in on your business at your fingertips, wherever you are. Most modern POS systems are designed to integrate with common tools like payroll management. And to meet your specific needs (or indulge your whims), some POS companies even have their own app markets. Clover, for example, has the Clover App Market with hundreds of apps you can add with the touch of a button.
Financial health
With a good POS system , you not only streamline your business practice, you help your bottom line. Top-notch security and PCI compliance are built right into your devices, so you won’t have to worry about chargebacks or fraud. More advanced POS systems can even provide financial services, such advances against your own sales (Clover Capital).
What to consider when selecting a POS system
The world of POS systems has gotten a lot more crowded in recent years, so your choices are now much more plentiful. To determine which POS is right for you, we recommend starting with your business type and structure, goals and expectations, and budget considerations.
Your business
The first and most immediate question to ask when considering a POS system has to do with the nature, size and structure of your business. Namely:
- Are you in the food, retail, or service sectors?
- Do you sell products, services, or a mix of both?
- What is the size of your business?
- Do you operate strictly online, have a brick & mortar, pop-up, or mobile store?
- What is your staffing setup? E.g., are you employee-owned, fully staffed, or work primarily with contractors?
Your goals and expectations
Next, consider how you expect to use your POS system. Will you need it just for payment processing or also for…
- Inventory management
- Appointment scheduling
- Payroll & other staffing needs
- Reporting
- Processing payments to vendors and other suppliers
- Marketing
- Customer engagement
Those last two points merit special consideration, as POS systems can collect, store, and sort valuable information about your customers so you know who is the most loyal to your brand, the most likely to respond to a discount or coupon offer, and so on.
Let’s also think down the road a bit. Do you have a strategic plan mapping out your next 1, 5, 10 years? Are you interested in growing the business or opening new locations? Or do you plan to keep steady with your initial launch?
Your finances: present and future
Having a good grasp on your budget is an important aspect of selecting the right POS system. In your income and expense projections, account for credit and debit card processing fees. Think about your item prices, and estimate your average ticket. That data will be useful since credit card fees often include percentage of ticket as well as a flat transaction fee. Your plans for growth over time, if any, will also have an impact here.
Do you use an independent accountant, have a bookkeeper on staff, and/or do you rely on software like Quickbooks? Some POS systems will integrate with your accounting software. For example, Clover works great with Quickbooks, automatically updating based on transactions processed. Generating reports is a built-in feature of many POS systems, including Clover, so you can access your numbers with the touch of a button.
On-premises vs cloud POS systems
On-premises POS systems might be able to save you money since you won’t need to pay ongoing software or data storage fees. However, there may be higher costs associated with purchasing the system, having it customized to your needs, and hiring consultants to make sure your business practice is in alignment with the Payment Card Industry Data Security Standards (you can read all about that here).
A cloud POS system might be a smarter choice in the long term. Cloud POS systems typically have a lower upfront cost, which is great for a business just starting out. Once your system is in place, many of your managerial tasks (such as inventory, payroll, and reporting) can be automated or streamlined so you have more time to focus on strategy and planning. With a cloud system, you also have an element of future-proofing. As new software and security protocols become available, you can update your system with ease or even automatically. And if you want to keep an eye on your business while you’re off-site, you may be able to access your data on a web or mobile platform. Clover does this through the Clover Dashboard.
Other things to consider
There are a few more things to keep in mind when choosing the right POS. Certain POS systems will have industry- or vertical-specific software that may be valuable to you. For example, if you run a restaurant, check out the power and ease of Clover Dining. Explore managing your HR needs with Homebase. If you’re an appointment-based business, look into tools to help your customers book, confirm, or reschedule with ease such as Cojilio. And don’t forget about financial services like cash advances through Clover Capital.
Most POS systems will give you multiple options in terms of devices to maximize power, mobility, and efficiency. For example, if you have a full-service restaurant, it might be worth it to have a handful of Clover Flex devices available so your servers can take orders and payments tableside.
Lastly, do careful research about what kind of tech support is available and/or included in your plan. A good POS provider should enable you to focus on making your business succeed, and that includes providing 24x7 support, whether live or via chat.
How much does a POS system cost?
Pricing structures for POS systems vary across a number of categories. It can seem a bit overwhelming when you start comparing pricing across POS providers, so it’s helpful to break it down to the various components. These are the types of costs you can expect:
Equipment costs
Some POS systems require you to purchase the equipment while others provide options for rental. If yours is a new business, it may be best to rent a system for maximum adaptability when you’re starting out. If you’ve been around for a while, do the math and see if buying might be a better investment. Keep in mind that if you rent, you can adapt as new equipment becomes available, which may be an important consideration.
There are many different options for hardware, depending on the type and size of your business. If you want a small handheld device that’s great for servers to take orders and payments at the table (ours is Clover Flex), prices range from $300-$500. Small countertop devices (like Clover Mini) can cost anywhere from $299 to $800, but some may require you to purchase a tablet to make the system work. If you want a top-of-the-line, full-service system (Clover Station Duo for example), you can expect to pay between $800 and $1,400 for your equipment.
Processing charges
In addition to basic banking fees, you’ll need to pay for credit and debit card processing. These fees might be a flat rate or a percentage of the sale processed, but usually it’s a combination of the two. As an example, you can expect to pay about $0.10 per credit card transaction, plus between 2% and 3% of the sales transaction. If you are processing a credit card payment without the card present (in industry parlance it’s called “card not present”), the percentage jumps to around 3.5% to cover the added liability. Estimate how many transactions you intend to process and how much in net sales you expect to make, to calculate your approximate total monthly fees. It’s important to note that who you bank with can also affect these costs. Ask your bank as well as your merchant processing provider for their fee information, and don’t be afraid to ask detailed questions. Some merchant services will assess an additional fee if you don’t meet a monthly minimum in your charges. You can read more about that here.
Essential software costs
Some POS systems may charge you a fee for software. You won’t be able to use the system without it, so you should consider this part of the base fees involved with using a modern POS. Usually this software cost varies based on the type of device you are using, but it generally ranges from about $15 to $70 each month as a flat fee.
Additional software costs
Are you interested in extra software offered through your POS System? If you choose Clover, you’ll have hundreds of apps at your fingertips in the Clover App Market. Many of them are free, but some have costs. One-time purchases can range from $0.99 up to $30. Other apps have monthly costs or per-use fees. Think about which apps you intend to use and calculate how much it will cost to get the functionality you want in your POS. These apps are optional, of course, but if they are integral to your business practice, be sure to include them in your budget.
More POS resources
Choosing a POS system is a big decision, and shouldn’t be rushed. After all, you and your staff will use the system each and every day you do business. Take your time doing your research, and know that the best way to start is by examining and articulating your needs and goals for the business. Check out our other guides: Merchant Services, PCI Compliance, and Should I Upgrade My Cash Register to a POS System?
