In its simplest form, a POS solution replaces a simple cash register. It sits where the traditional cash register did and based on what is sold, how much is sold and the prevailing price, the solution adds taxes and works out what is due. It records the sale and tracks the cash received. However, the similarity with conventional cash register ends here.
Modern POS systems go well beyond this basic capability. Once a sale is recorded in their database, they can perform all kinds of backend operations to provide managers with information to make their businesses more efficient. Some key areas where POS solutions really stand out are:
No. There is a wide variety of distinct verticals offered by different POS solutions. For example, a solution that caters to clothing retail could have the built-in capability to handle the different colors and sizes of garments. You will want to collect this data to determine which colors and sizes are popular and stock accordingly. The hospitality POS solution is very different. A restaurant POS solution will also have a different underlying structure. Purchasing a solution without understanding these basic differences could force you into needless (and expensive) customization.
A typical POS solution will consist of POS terminals at the checkout counters, barcode readers, POS printers, POS cash registers, credit card readers and customer displays. Some of these can be combined together - the keyboard or the monitor could include the magnetic card reader for example. Touch screen enabled POS systems have become commonly available, improving employee productivity further.
At the backend, there is a server that stores the data and creates reports for managers to monitor. Depending on the scale of operations, a single server may suffice, or a business may have several servers, each dedicated to a specific task. Standard IT tasks such as server administration, data back up and database management will need to be planned for.
The entire hardware is connected over a network and must be provided with a stable power supply. Connectivity could even be over a wide area network if several stores use common servers and data. In such a situation, a more complex network may be necessary to ensure that operations are not impacted by Internet non-availability.
In most cases, POS software does not really demand high end computing devices. Therefore, hardware specs do not really need to be cutting edge or top of the line. Any midrange device should perform reasonably well. As mentioned previously, there is a range of software that is built for different industry verticals. Even within a vertical, there could be a wide selection to choose from.
Even within the same vertical there are several classes of POS solutions. The solution that a small store with a single location will use should be very different from that used by a large retail chain. The classifications are:
There is often a feeling among business owners that a small business that has not yet hit $3 million in revenue cannot derive much benefit from POS solutions. This is not true. Even though the volume of business may be small, the backend analytics, inventory management and customer support provided by a POS solution can help the business grow faster and retain customers more effectively.
Features can be broken down into several key categories. Each of these categories will have a number of features. Some may be unimportant to your business, others could be absolutely critical. Broadly speaking, these are:
- Create and print bills
- Customer support
- Market reputation and user feedback
- Handle credit cards
- Handle gift certificates / cards
- Handle customer loyalty cards
- Support frequent buyers
- Create and manage customer records
- Calculate sales commissions
- Manage promotions and ad campaigns
- Compliance with PCI (Payment Card Industry) standards
- Managing returns and exchanges
- Tracking employees
Inventory management features:
- Track inventories by classification, department, serial number or other parameters
- Analyze inventory movement. Track slow and fast moving inventory
- Create item groups (example-toiletries) that often sell together
- Track consignments
- Track special orders
- Automatically generate resupply orders
Accounting and bookkeeping:
- Manage accounts receivable and payable
- Handle bank reconciliation
- Handle commissions and payrolls
- Interface with the specific accounting module used by your business
Integration with other software and reporting solutions:
- Large range of relevant, readymade reports
- Easily create custom reports
- Creation of mailing lists
- Integration with CRM systems to schedule customer calls and campaigns
- Network support
- Multi store support
- Support for POS cash drawers, signature pads, weighing scales and online check verification
- Customer displays / pole displays
- Support for iPad terminals for inventory management, invoicing etc.
- Integrate website sales with POS database and inventory
- Integration with your current eCommerce solution
- Support website cart with POS data (item details, pricing, quantity available)
- Connect to and manage accounts from online payment gateways
Managing promotions and ad campaigns:
- Track advertisement effectiveness
- Track impact of promotions and in-store changes
Features specific to your industry:
- Check with your vendor
Costs vary considerably given the kind of solution you select. A basic solution can start at about $2,000, whereas an upper end or enterprise solution can run into millions. While you will obviously look for a solution that meets the scale of your operations, do not focus on price alone. Look for a system that meets your business needs, is upgradable and that allows you to purchase additional modules as your requirements grow.
A POS system that complements your operations will pay for itself rapidly by lowering transaction costs, improving sales and increasing efficiency.
In general, the hardware you buy should last you 5 to 7 years. The vendor should provide regular software updates and you should be able to add new terminals with ease, without having to overhaul your server infrastructure.
Most solutions are offered through authorized resellers and vendors. As a result, there could be differences in costs, service quality and implementation between vendors offering the same solution. Therefore, you must not only select the solution you wish to use, you must also devote some effort to vendor selection.
A number of online forums can help in giving user inputs about the quality of service and support a vendor provides. It is important to select a vendor that has a presence in your city. One must also ask for references and check their impressions about the quality of vendor's support.
During vendor selection also look for the following:
Many businesses have use for mobile POS terminals. These could be connected to the regular system over Wi-Fi, in which case it would operate just like a normal terminal (except a printer may not be available). On some systems, the terminal could be self contained and will update the POS system subsequently in batch mode.
If the mobile point of sale option is exercised imaginatively, it could open up new avenues of sales. For example, restaurants that equip their staff with iPad POS systems can deliver higher quality customer service.
Once a few solutions have been shortlisted, it is time to take them for a test drive. Ask vendors to offer their solutions for trials and check them out for the following:
Remember that trials must involve different kinds of users. Billing clerks, accounts persons, inventory managers and store managers will all use the system for some time and their input is important.
A number of POS solutions are now being offered in the Software as a Service (SaaS) model. In such a situation, the solution runs in a data center instead of on your servers, and the POS terminals connect to the data center to run the solution.
There are pros and cons to using such solutions.
The advantages are:
The one big disadvantage of using SaaS solutions for POS systems is their dependence on the Internet. One cannot have a situation where sales don't go through due to poor connectivity. SaaS vendors have also realized this and often offer solutions that store critical data offline so that basic sales activity can go through without a hitch in case of difficulty in connecting to the Internet. In such systems, POS servers are updated when connectivity is reestablished.
Many businesses, particularly smaller ones, may find SaaS POS solutions attractive. Our recommendation is to carefully evaluate off-line operations before committing to a purchase.
Even after your system is up and running there are a number of steps you can take to ensure you get the best possible returns from your investment. Some of the steps that can be taken are:
It may take some time and effort to find a POS solution that is perfect for you, but it is time well spent. A good solution will not only help you service sales better, it will also help you improve the decisions you take about your business by giving you quality information about what is making your sales move.