What Is a POS System and How Does It Work?

The term Point Of Sale (POS) refers to a retail system used by merchants and retailers at the point of sale. The point of sale is where a sale happens – it’s the place where a customer makes a purchase from a retailer, usually with a payment method such as cash or credit card. POS software is used to track sales transactions and manage inventory.

A POS system typically consists of three components: the hardware, the software, and the back-end database. The hardware includes a computer (or tablet), cash drawer, receipt printer, barcode scanner, and card reader. The software is what runs on the computer and manages transactions. The back-end database stores information and records and can be run on a separate database server. Most POS systems use multiple computers to manage all the hardware components.

POS systems are designed for collecting customers’ credit card information, tracking inventory and sales transactions, processing payments, and printing receipts for transactions.

Hardware

A computer (or tablet) with a touch screen interface where the customer makes selections.

Cash drawer that allows cash to be stored securely when not in immediate use. Some cash drawers are designed to integrate with receipt printers and barcode scanners so they can remain closed until it is needed for a transaction, at which time it would open. Other cash drawers have a separate slot where the customer inserts their credit card to pay.

The receipt printer prints a receipt for the customer after a purchase is complete.

Barcode scanner scans barcodes on products and prints the product information on the receipt.

A credit card reader reads the magnetic strip on a customer’s credit card and sends the information to the computer for processing.

Software

The software is what runs on the computer and manages transactions. It typically includes the following features:

  • Customer lookup by name or number
  • Inventory lookup by product name or SKU
  • Transaction tracking including sales, refunds, discounts, and taxes
  • Printing of receipts, reports, and labels
  • Credit card processing
  • Payment processing standards integration with credit card acquirers including EMV, PCI DSS compliance, and SSL encryption

Back-End Database

The back-end database stores information and records. It is usually accessed through transaction reports generated by the POS system. Some systems perform inventory management on the back end while some rely on the user to do this manually. The back-end database can be run on a separate database server. This allows for more robust reporting and data management features. It also provides redundancy in the event of a system failure.

POS systems are used by merchants and retailers at the point of sale to track sales transactions, manage inventory, and process payments. A point of sale system typically consists of several hardware components and a software application to manage the different functions.

The term “point of sale” refers to where a sale happens – it’s the place where a customer makes a purchase from a retailer, usually with a payment method such as cash or credit card. The point of sale is where the sales transaction takes place, whether it’s in person or through an online store. The point of sale is usually where a customer makes a purchase from a retailer, using cash or some kind of payment card.

Merchant Application

POS software is designed to run on computers located at the point of sale, typically attached to a cash drawer, receipt printer, barcode scanner, and credit card reader. The software is used to manage sales transactions, track inventory, and process payments.

The merchant application is the software that runs on the point-of-sale computer(s). It typically includes features for customer lookup by name or number, inventory lookup by product name or SKU, transaction tracking including sales, refunds, discounts, and taxes, the printing of receipts, reports, and labels, credit card processing, and payment processing standards integration with credit card acquirers.

The merchant application is typically customized for each business and it is specific needs. For example, a retailer might require the ability to track inventory levels and place orders for new stock, while a restaurant might need the ability to process table reservations and track tips.

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