What is a POS (Point of Sale) System and How Does it Work? [2024 UPDATE]

Point of sale systems are a staple in pretty much any business that transacts with its customers face-to-face. Whether you’re a retail store or a restaurant, you need a POS solution to effectively ring up sales and take payments. 

It’s easy enough to comprehend, but the fact is, there are a number of subtle differences and nuances to consider if you want to better understand POS systems—and ultimately select the right solution for your business. 

There are different components to a point of sale system, and there are several players and components involved in making it work. 

In this article, we’ll go over all your burning POS questions and prepare you with the knowledge you need to pick the right system for your business.

• What is a POS? 
• Benefits of a POS system
• What are the different types of POS systems?
• How does a POS system work?
• How much does a POS system cost?
• How to choose a point of sale system
• How to set up a POS system

What is a POS? 

POS stands for point of sale, which is essentially the location or environment where a sales transaction takes place.

Now, the term “POS” can sometimes be used interchangeably with terms like “POS system” or “POS software”, but as mentioned earlier there are some subtle differences between these terms. 

What is a POS system vs. POS software?

A point of sale system refers to a complete transactional setup used to conduct sales and manage customer transactions. The system includes components like software and hardware—for example, payment terminals, receipt printers, scanners, etc.

POS software is just one aspect of your overall point of sale system. It’s the digital platform that processes transactions, manages inventory and integrates with other business apps.

Collectively, a POS system is the software and hardware that a store, restaurant or other business like a golf course needs to run their business. From ordering and managing inventory to processing transactions and even managing customers and staff, the point of sale, is the central hub that keeps a business running. 

Together, POS software and hardware give small businesses all the tools they need to accept payments, as well as manage and understand the health of their businesses. You use your POS to analyze and order your inventory, manage your employees, understand your customers and make sales.

POS system vs. point of sale 

POS is an abbreviation for point of sale, which refers to any place where a transaction can happen, whether it’s for a product or service.

For retailers, that’s usually the area surrounding their cash register. If you’re at a classic diner, for example, where you pay a cashier instead of giving your money to a waitress, that area by the cash register is also considered the point of sale. The same principle applies for, say, golf courses— anywhere a golfer buys new gear or a drink is a point of sale. 

The physical hardware enabling the point of sale system is situated in the point of sale area—the system is what allows that area to be a point of sale. 

If you have a mobile cloud-based POS, your entire store effectively becomes a point of sale (but we’ll get to that a little later). A cloud-based POS system also extends beyond your physical location; you can access the system from anywhere because it’s not bound to an on-site server. Cloud POS systems typically require an internet connection, though some may also work offline. 

Benefits of a POS system

Why invest in a POS system? Do you really need one? While you can technically run your business without a POS solution—e.g., using pen and paper or a traditional cash register—these methods are far from efficient. 

You’d be leaving a lot of room for simple human error—what if an employee doesn’t read a price sticker right and under or overcharges a customer? How will you keep track of your inventory in an efficient, modern way? If you run a restaurant, what if you need to make a last-minute menu change across multiple locations?

Having a POS system offers your business several benefits, including the benefits listed below.

Increase efficiency

POS systems enable you to ring up sales faster. With an old-fashioned cash register or (heaven forbid) pen and paper,  you’d have to manually enter items and update your inventory records for each transaction. Point of sale systems take care of all of that for you by automating these processes, integrating directly with inventory management and instantly updating sales data.

Beyond facilitating the checkout process, modern POS systems help you manage the backend of your business. Whether it’s inventory counts, menu creation or customer management, the right point of sale system has got you covered. 

Improve the customer experience

Faster checkout and more efficient operations create better customer experiences. When your business is running smoothly, guests get faster service and have more opportunities to engage with your staff.  Being able to run your business, serve customers and process transactions from anywhere results in shorter lines to pay and faster customer service.

Not only that, but you can use your POS system to drive loyalty. Most POS solutions come with built-in rewards programs (or can integrate with other software), which means you can easily track customer purchases and offer targeted promotions and rewards that encourage repeat business.

Drive sales and revenue

All of the above leads to increased sales and revenue. How? Simple: operational efficiencies and enhanced customer experiences directly contribute to more sales, which can ultimately lead to a higher bottom line. 

Mobile cloud-based POS systems also enable new sales opportunities, like opening a pop-up shop or selling at trade shows and festivals.

What about the disadvantages of a POS system?

No system is perfect, and while POS systems offer many benefits, there are a few disadvantages, including:

• Initial costs for setup and hardware can be high
• Ongoing maintenance and updates may be required
• There might be a learning curve for staff

Additionally, reliance on technology means that technical issues can disrupt service and data security is a constant concern.

Generally speaking though, the benefits of modern POS systems far outweigh the drawbacks.

What are the different types of POS systems?

As you can see from the table above, POS systems come in various forms. Here’s an easy-to-grasp overview to give you a better idea of what each type offers and how they might fit into different business environments.

Multichannel POS

A multichannel point of sale system is a solution that enables you to transact across online and offline sales channels. It integrates brick and mortar and ecommerce to provide a seamless experience, allowing inventory and sales data to sync across all platforms. That way, if you sell something on one channel, inventory is automatically updated to reflect this across all other channels, preventing overselling and stock discrepancies.

Advantages of a multichannel POS:

• Enhanced customer experience. It provides a consistent customer experience across various platforms, from physical locations to online marketplaces.
• More sales opportunities. You open up multiple channels for revenue so you can reach a wider audience.
• Improved inventory management. This system syncs inventory in real-time, reducing the chances of stock-outs or overstock situations.
• Deeper insights. A multichannel POS collects data from all sales channels and provides valuable insights into customer behavior and trends.
• Efficient operations. You can streamline operations by automating tasks like inventory updating and order processing across channels.

Disadvantages of a multichannel POS:

• May introduce complexity. Selling on more than one channel can be complex and the system may be time consuming to set up.
• Higher costs. It typically involves higher setup and maintenance costs compared to single-channel systems.
• May require more training. Staff may require additional training to manage the diverse functionalities of a multichannel system effectively.

Mobile POS 

A mobile POS system is exactly what it sounds like: it’s a POS system that runs on a mobile device like a phone or tablet. Mobile POS systems are a great option if you operate in a dynamic environment. 

For instance, if you’re in a busy retail store, a mobile POS can help you ring up customers on the sales floor so they don’t have to line up at the checkout counter. Similarly, if you run a restaurant, a mobile POS can allow servers to take orders and process payments right at the table, speeding up service.

Advantages of a mobile POS:

• Increased mobility. It allows staff to conduct sales transactions and provide service to customers anywhere within the facility or at off-site locations.
• Improved customer experience. You can reduce wait times and lines at traditional checkout stations by enabling transactions on the spot.
• Cost-effective. These systems are typically less expensive than mounted POS systems as they use existing mobile devices.
• Flexibility. It’s easy to scale up or down depending on business demands and can be quickly deployed to new venues or event locations.

Disadvantages of a mobile POS:

• Security concerns. There may be an increased risk of data breaches or theft if mobile devices are lost or stolen.
• Dependence on connectivity. These systems may require consistent Wi-Fi or mobile data connectivity to operate effectively, which can be unreliable in certain locations.
• Hardware limitations. Mobile devices may have limitations in terms of battery life, screen size and processing power compared to traditional POS hardware.
• Durability concerns. Mobile devices are generally less sturdy than traditional POS equipment and may require additional protective measures to prevent damage.

Tablet POS

A tablet POS is a subset of the mobile POS category, since a tablet is technically a mobile device. That said, mobile POS systems encompass all mobile gadgets, including phones and tablets.

A tablet POS focuses on the tablet category—e.g., iPads or Android-based tablets. 

The advantages and disadvantages of tablet POS systems are largely similar to mobile POS solutions. 

Kiosk POS

A kiosk POS is a standalone station equipped with specialized software and hardware that allows customers to complete transactions independently. You often see kiosk POS systems at supermarkets or department stores that offer self-checkout. 

Advantages of a kiosk POS:

• May lower workforce expenses. This system can reduce labor costs by minimizing the need for staff at checkout points.
• Better customer experience. Depending on how they’re used, kiosk POS systems could enhance customer experience by offering convenience and reducing wait times.
• Smoother operations. It can efficiently handle high volumes of transactions, especially during peak hours.

Disadvantages of a kiosk POS:

• Cost concerns. Kiosk POS systems require high initial investment for setup and technology integration.
• Security risks. Certain issues can arise, including vandalism and data breaches.
• Maintenance work and costs. They may require regular maintenance and updates to software and hardware.

Legacy POS

A legacy POS is a traditional point of sale system that usually involves more basic, standalone hardware and software, often not integrated with modern cloud-based services or advanced features.

While it’s a step up from an old fashioned cash register, a legacy POS still operates primarily offline and requires manual updates and maintenance, making it less flexible than more modern, integrated systems.

Advantages of a legacy POS:

• Basic functionality. A legacy POS provides stable performance without the need for constant internet connectivity.
• May be cheaper in the short-term. It’s cost-effective for small businesses not requiring advanced features or integrations.

Disadvantages of a legacy POS:

• Difficult to scale. Legacy POS systems offer limited scalability and flexibility, making it difficult to update or integrate with new technologies.
• Inefficient. You’ll have to carry out manual processes for updates and data syncing, which can be time consuming and error-prone.
• Limited insights. Inability to access real-time data or perform analytics, potentially hindering business insights.
• Expensive in the long term. There are higher long-term costs due to the need for physical upgrades and maintenance.

Terminal POS

A terminal POS is a dedicated electronic device designed specifically for processing sales transactions. Sometimes referred to as “POS terminal”, this term refers mostly to the hardware on which the POS software runs. 

The pros and cons of a terminal POS (or POS terminal) will vary depending on the specific needs and scale of the business using it. 

If you have a mobile POS terminal, then the system can offer greater flexibility and mobility, allowing transactions to be processed anywhere within or outside the store. 

On the other hand, computer-based POS terminals typically provide more robust processing power and larger storage capacity, suitable for handling higher volumes of transactions and more complex business operations.

Handheld POS

A handheld POS is a point of sale solution that operates on portable devices that you can hold in the palm of your hand. It typically comes in the form of a tablet POS or a system that works on a smartphone. 

The advantages and disadvantages of handheld POS systems are similar to those mentioned in the mobile POS system category above. 

Cloud-based POS

A cloud POS system is a point of sale solution that operates on cloud technology. These systems function fully online, so they allow data to be accessed from any device with internet connectivity.

Advantages of a cloud POS:

• Real-time data access. A cloud point of sale system enables access to sales data and inventory from any location with internet connectivity, facilitating better management decisions.
• Scalability. It easily adjusts to the size and needs of a business. It’s easy to upgrade to get more functionality or manage multiple locations.
• Cost efficiency. It often operates on a subscription model, reducing the need for large upfront investments in hardware and software.
• Automatic updates. Software updates are handled by the point of sale provider. This helps ensure the system is always running the latest features and security patches.
• Integration capabilities. Cloud software easily integrates with other cloud-based applications so you can expand its capabilities. 

Disadvantages of a cloud POS:

• Dependency on the internet. It requires a continuous internet connection to function, which can be problematic in areas with unreliable connectivity. The good news? Solutions like Lightspeed have offline mode.
• Ongoing costs. Depending on your system, the subscription fees can add up, becoming a significant expense over time.
• Potential for downtime. A cloud POS relies on the cloud provider’s servers, so any downtime or technical issues on their end can affect POS functionality.

How does a POS system work?

From the perspective of your customers, a POS system works by streamlining the checkout process, calculating costs, facilitating payment, and updating sales and inventory data seamlessly. Here are the steps involved in the process: 

1. A customer decides to purchase something—an item, food or a service.
2. Your POS is programmed with inventory and price data, and uses that to calculate the total and apply taxes when applicable.
3. Whether through card, cash or digital payments, the customer pays you.
4. The sale is finalized; your inventory and sales data update so you have an accurate picture of your business.

That’s the customer-facing side. On the backend, a point of sale system functions when its various components communicate with each other to facilitate the transaction. 

For example, let’s say you’re a retail store that has a cloud-based POS running on your tablet. You ring up sales behind the counter and your system has all the bells and whistles—including a barcode scanner, cash drawer and receipt printer. 

Here’s how your POS system would work:

1. A customer hands their product to the cashier, who scans the barcode. 
2. The POS software recognizes the product and pulls it up on the sell screen so the cashier can add it to the sale. 
3. Once all the products have been added, the cashier prepares the system for payment by selecting the appropriate payment type on the POS interface.
4. The POS terminal interfaces with the payment terminal, which processes the payment by communicating with the bank or payment processor to approve the transaction.
5. Once the payment is approved, that data is sent back to the POS system, which updates the inventory levels to reflect the sold items.
6. The receipt printer generates a receipt for the customer, completing the transaction.
7. The sales data is recorded in the POS system for reporting and analytics, helping the business track sales performance and inventory status.

Now, that process may look a bit different depending on your POS system setup. For example, if you’re using a mobile POS without a receipt printer, then the receipt would be sent digitally via email or SMS to the customer. 

But the basic premise is the same; a POS system facilitates transactions by processing payments, updating inventory and providing transaction records.

How much does a POS system cost?

Cloud-based POS systems are paid for through subscription costs, either monthly or annually. And depending on your provider, subscriptions can cost anywhere from $0/month (for a really barebones system) to well over a hundred dollars for advanced capabilities. 

Aside from POS functionality, your costs will depend on the number of locations you have. The more stores or restaurants you need to connect and manage in your POS platform, the higher the cost since each of those locations will need hardware and software. 

Payment processing is another factor that can affect your POS system costs. Most providers charge a fee for processing credit card payments, which is usually a percentage of each transaction plus a fixed fee, and this can vary significantly between providers.

The bottom line? There’s no one quick answer to how much POS systems cost, because it all depends on your needs and the providers you choose. 

How to choose a point of sale system

The question of how to choose a point of sale system is another tricky one to answer, because every business is different. To choose the right point of sale system for your business, you need to consider your needs and business type, alongside your software and hardware requirements. 

Let’s start with software.

POS software considerations

POS software powers a POS system and includes two overarching functions: 

• The cashier component (for ringing up sales in retail, taking orders and settling the bill for restaurants, and pro shop, clubhouse and tee time management for golf courses).
• The business management component.

No matter the type of business, every point of sale should have the following key features to be considered worth your consideration.

Register software

The register software (or register application) is the cashier-facing part of POS software. It’s where the cashier will ring up transactions and the customer will pay for their purchase. It’s also where the cashier will perform other tasks related to the purchase, like applying discounts or processing returns and refunding money if needed.

Business management software

This part of the point of sale software equation either runs on a desktop PC as installed software or, in more modern systems, is accessible via any web browser. Business management software includes all kinds of advanced features that will help you better understand and run your business, such as inventory and sales data collection and reporting.

Between managing an online store, brick-and-mortar retail store, order fulfillment, inventory,  paperwork, customers and employees, being a retailer is more complicated than ever. The same can be said for being a restaurateur or golf course operator. Online ordering and evolving customer habits on top of paperwork and employee management is time consuming. Business management software aims to help you manage it all more easily.

The business management side of modern POS systems can best be thought of as the mission control of your business. Because of this, you want your POS to integrate with the other apps and software you use to run your business. Some of the more common software integrations include email marketing and accounting tools. With integrations, you can run a more efficient and profitable business because data is shared between programs.

With consumers using smartphones at an explosive rate, a host of new POS functionalities and features have emerged to help independent retailers, restaurants and businesses of all kinds to offer a connected, omnichannel customer experience. 

Integrated payment processing

In an effort to make business owners’ lives easier, mobile POS system providers started doing payment processing in-house, officially removing complicated (and potentially risky) third-party payment processors from the equation.

The advantages for businesses are twofold. First, they can work with one company to help them manage both their business and its finances. Secondly, the pricing is often far more straightforward and transparent than with third parties. You benefit from one transaction rate for all payment methods and no startup or monthly fees.  

Loyalty program add-ons

Some POS system providers also offer a mobile app-based loyalty program integration. Roughly 83% of consumers say they’re more likely to buy products from a business with a loyalty program—59% of which prefer ones that are mobile app-based. Surprising? Not really.

The use case for implementing a loyalty program is simple: to show customers that you value their business so that they feel appreciated and keep coming back. You reward their repeat business with incentives like discounts and other promotions that aren’t available to the general public. It’s all about customer retention, which is up to five times less expensive than attracting new customers.

Scaling your loyal customers by as little as 5% can grow your sales by up to 75%. 

When you make your customers feel like their business is appreciated and recommend products and services that align with their needs, you increase the likelihood that they will talk up your business to family and friends.

Staff management 

Modern point of sale systems can help you manage employees by making it easy to track hours worked and performance. This helps you reward your best staff and coach those who need more help. It can also simplify tedious tasks like payroll and scheduling.

Your POS should let you set custom permissions for managers and employees. With this, you can control who has access to your POS’ backend versus those who can only access the frontend. 

Whether it’s through built-in features or a seamless integration (or a mix of both), you should also be able to schedule your employees’ shifts, track the hours they work and generate reports that detail their on-the-job performance (for example, how many transactions they process, their average items per transaction, and their average transaction value). 

Ongoing support 

Support is not in and of itself a feature of a POS system; however,good, around-the-clock support is an incredibly important aspect of the POS system provider. 

Even if your POS is intuitive and easy to use, you’re bound to have questions at some point. And when you do, you’ll want 24/7 support to help you fix issues fast. 

POS system support teams can typically be contacted via phone, email and live chat. Along with on-demand support, consider whether or not the POS provider has supporting documentation like webinars, video tutorials and support communities and forums where you can chat with other business owners and operators using the system.  

Retail software considerations

Beyond the key POS features that benefit every kind of business, there is point of sale software designed specifically for retailers that address their unique challenges. 

Key features to look for in a retail point of sale:

1. Omnichannel selling capabilities
2. Customer relationship management (CRM)
3. Inventory management
4. Multi-store management
5. Advanced reporting 

Omnichannel selling capabilities

Omnichannel shopping experiences start with having an easy-to-browse, transactional online store that enables customers to research products, and end with having an equally convenient in-store experience.

As a result, an increasing number of retailers have adapted to their clientele’s behavior by choosing a mobile POS system that allows them to run both a brick-and-mortar and ecommerce store from the same platform. 

This enables retailers to look up whether or not they have a product in their inventory, verify their inventory levels at multiple store locations, create special orders on the spot and offer either in-store pickup or direct shipping. 

As consumer technology evolves and consumer behaviors change, mobile POS systems are increasingly focusing on evolving their omnichannel selling capabilities and blurring the lines between online and in-store retail. 

Customer relationship management (CRM) 

Customer relationship management refers to tools and processes involved in interactions with customers. 

Having CRM features in your POS makes it easier to offer personalized service no matter who’s on shift that day. Your POS CRM database allows you to create a profile for each of your customers. In those profiles, you can track: 

• payment information
• payment history
• favorite products
• purchase history
• shopping frequency

CRM databases also let retailers set up timed promotions (when a promotion is only valid for a given timeframe, after which the items on promotion revert back to their original pricing). 

Inventory management

Inventory is one of the most difficult balancing acts retailers face, but it’s also the most important thing to master as it directly impacts your cash flow and revenue. That could mean anything from basic tracking of your stock levels to setting up reorder triggers, so you’re never short of a valuable inventory item.

POS systems typically have robust inventory management functionalities that simplify how retailers purchase, categorize and sell their inventory. 

With real-time inventory tracking, retailers can trust that their inventory levels—both online and in their brick-and-mortar retail store—are accurate. 

Multi-store management 

One of the biggest advantages of a mobile POS is that it can support your business’s growth from one store to many. 

With a POS system built for multi-store management, you can consolidate inventory, customer and staff management across all locations and manage your entire business from one place. The benefits of multi-store management include: 

• Manage your physical stores and ecommerce store from one place
• Add stores, users and cash registers to your POS as you open new locations
• Create a single purchase order (PO) for all locations
• Access customer sales data across all locations
• Transfer items between stores 
• Compare store performance 

Data collection, reporting and advanced analytics integration

Outside of inventory tracking, reporting is one of the biggest reasons to purchase a point of sale system.

A POS should offer a variety of preset inventory and sales reports that give you insight into your store’s hourly, daily, weekly, monthly and yearly performance. These reports give you insights into all aspects of your business to help you make smart decisions that improve your efficiency and profitability. 

Once you get comfortable with the built-in reports that come with your POS system, you can start looking at advanced reporting integrations—your POS software provider may even have their own reporting system, so you know it’s built to work with your data. With all that data and reporting, you can start optimizing your store. 

This could mean anything from identifying your best and worst performing salespeople to understanding the most popular payment methods (credit, debit, check, mobile, etc.), so you can create the best experience for your shoppers.

These intuitive sales, inventory and employee reports let you turn insights into action and help you run your business smarter.

Hospitality software considerations

Hospitality POS systems are built for the everyday realities of running a restaurant. 

Key features to look for in a hospitality point of sale include:

• menu management
• online ordering support
• reports and analytics
• support for industry-specific tools
• inventory management

Menu management

Restaurants, at their core, are their menus—the spread of offerings, the ease of order taking and the taste of the dishes. 

A hospitality POS system should have menu management features that make modifying and updating menus a breeze. A cloud-based POS should give you the option to push menu modifications out to all locations at once. 

You should be able to give your waitstaff access to combos and menu modifiers so they can customize orders to the diner’s needs and tastes with ease. 

Online ordering support

Takeout and delivery are fundamental parts of the hospitality industry today. 

A POS system designed for that reality will go beyond being able to handle takeout orders made on site. It should give you options—you shouldn’t be pigeonholed into only offering delivery through third-party aggregators, and neither should you have to jump through hoops to do more than handle your own deliveries. 

A well-built hospitality POS system will enable you to:

• Give your customers a way to order takeout ahead of time without having to call or come to your restaurant. 
• Enable contactless dining through QR codes, so customers can order online at their table or while waiting in line. 
• Handle delivery through multiple platforms and on your own with ease.

Reports and analytics

Like retail POS systems, restaurant POS systems should track and report on data. 

However, the exact reports you’ll be looking for differ (though you’ll also want sales reports). You’ll be able to examine menu item performance so you can identify loss leaders and best sellers, as well as dining and sales trends. You’ll have reports on staff performance and hours, and you should be able to build custom reports so you can examine the data relevant to your unique business. 

Support for industry-specific tools

Running a restaurant is nothing like any other kind of business. There are industry-specific tools that help kitchens run better (like kitchen display systems) and ordering systems that customers have come to expect (digital self order menus) that you need to work with.

A hospitality POS will support these tools and integrate them fully with your system so you’re not juggling multiple disconnected tools. 

Inventory management

Ingredient waste and spoilage can be a huge drain on a restaurant’s revenue. You can’t stop the inevitable march of time on your fresh produce, but having a point of sale that helps you track your usage and stock on hand definitely helps.

Not all systems have inventory tailored to a restaurant’s needs, so you’ll need to be picky. Look for a hospitality POS that helps you track what’s been used and wasted, how much you have on hand and what you need to restock. It should calculate recipe costs and margins so you know what each dish is costing you and how much profit you’re making on it.

Golf software considerations

Golf course management systems are also different from the retail and hospitality industries, partially because golf courses generally manage both retail and hospitality arms on top of the course. 

Key features to look for in a golf course point of sale include:

• tee sheet software
• online booking support
• business intelligence
• retail and restaurant POS integration 

Tee sheet software

A cloud-based golf course POS system will have tee sheet software that you can access anywhere, any time. You’ll get tools to customize booking restrictions and automate billing so managing your tee sheet is easier. For recurring weekly or monthly leagues, your POS software will be able to automatically allocate tee times, ensuring you keep valuable returning customers happy.

With tee sheet software, you’ll also be able to track and review metrics about activity on your course. With attendance information, you can make decisions about hours, staffing needs and event times. 

Online booking support

Digitally connected golf course POS systems are better for golf course operators and golfers alike. 

You get member management tools, while golfers can book tee times online and coordinate with other members. Booking online is a simple, straightforward perk that could mean the difference between golfing at your course or booking with a competitor who is more convenient. 

Business intelligence

Data and reporting are important for golf course owners. And the specific data golf courses need differs from purely retail and restaurant businesses. 

Beyond the metrics being tracked through your tee sheet, a golf course POS system’s more advanced analytics can drill deep into your data and examine performance across your course, pro shop and clubhouse. You can track:

• golfer demographics
• staff schedules and performance
• per-shift sales and revenue
• inventory levels and performance
• payment type by customer

Retail and restaurant POS integration

Running a golf course is about more than just keeping the green fresh. Your pro shop and clubhouse are key parts of your operation, so you don’t want all parts of your business to be disconnected from each other.

A cloud-based golf course POS system that integrates with your retail and restaurant POS gives you a better view of your whole course. It connects the experience for customers, from green to clubhouse and beyond. 

POS hardware considerations

Part of choosing the right POS system hinges on hardware. Here’s what you should think about on the hardware side of things. 

POS terminal

A POS terminal is the device that the mobile POS software runs on. 

For old-school, on-premise systems, the cash register was the POS terminal. With newer options, merchants can use either a desktop computer, laptop, tablet or smartphone—any device with internet connectivity.

Many businesses opt to use tablets, like an iPad, with a stand that turns them into a countertop device. The advantage of this setup is in its inherent flexibility. Retail sales clerks have the freedom to pick up their tablet, look up inventory, access customer profiles and process transactions anywhere on the sales floor. Waitstaff can send orders directly to the kitchen without leaving the table.

Credit card reader

A card reader is also referred to as a credit card terminal. It’s what merchants use to accept credit and debit card payments, and allow for contactless payments at checkout. 

There are three ways a credit card reader can accept payments:

1. Reading the card’s magstripe (swiping the card) 
2. Reading the card’s chip through an EMV (Europay, Mastercard or Visa)
3. Using near-field communication (NFC) to accept payments from mobile payment providers like Apple Pay

Most consumers prefer cashless payments. According to Statista, the total number of cashless transactions worldwide is expected to reach approximately 2.297 trillion in 2027. This should comes as no surprise, given that cashless payments are typically quicker and more efficient, which leave the customer with more time to do their thing. 

Receipt printer

While the majority of consumers now opt for email receipts, it’s still important to offer printed receipts. If you’re running a restaurant, you’ll also likely need a receipt printer in the kitchen.

There are different types of receipt printers. 

Impact printer

Sometimes referred to as a transfer or dot-matrix printer, impact printers can use either wax, resin or an ink-soaked ribbon that comes in the form of a cartridge and drops into the printer (similar to ink cartridges in a computer printer) to print receipts and tickets. They are called impact printers because the print head makes an impact on the ribbon and against the paper to print the text and images.

Impact printers are most often used as kitchen printers because they can withstand higher temperatures without affecting the printing ability.

Thermal receipt printer

Sometimes referred to as a direct printer, thermal receipt printers use heat to imprint text or images against a special kind of paper. These are the most common types of receipt printers used at the point of purchase. They are quiet, fast, efficient and cost-effective since they use a direct heat source (rather than ink) to print.

Receipt printers can connect to a merchant’s POS terminal via USB or Bluetooth. Most POS system providers can also provide you with receipt printer paper. 

Cash drawer

To support customers who still want to pay cash, businesses need a cash drawer. They generally come in several sizes to support all business types. Cash register trays are inserts that go into the cash drawer. They include numerous bill tray and coin tray compartments to store and organize different monetary denominations.

The number of bill and coin tray compartments will vary depending on the size of the cash drawer. Smaller cash drawers may only have four or five coin and bill compartments, while larger drawers may have six to eight compartments.

As with barcode scanners and receipt printers, most POS-compatible cash drawers can connect to the POS terminal either by USB or Bluetooth. 

Most POS system providers provide you with a list of compatible hardware and can get you set up with what you need with minimal hassle. With Lightspeed, you can get everything you need with our hardware kits. 

POS hardware for specific kinds of businesses

While there is overlap between POS system needs, retail stores, restaurants and golf courses may also need specialized hardware.

Here are some examples.

For retailers and golf pro shops: barcode scanner

Retailers with a lot of inventory need a barcode scanner to help them manage, stock and speed up their checkout process. Similar to receipt printers and cash drawers, you can connect a barcode scanner to a compatible POS terminal either by USB or Bluetooth.

There are different types of barcode scanners.

1D barcode scanners

A one-dimensional barcode scanner is used to scan linear Universal Product Codes (UPC) on consumer goods in a retail environment.

2D barcode scanners

A two-dimensional barcode scanner is used to scan more complex codes such as Data Matrix, QR Code and PDF417. The most common use in a storefront is scanning 2D barcodes on a driver’s license for age verification.

For restaurants and golf clubhouses: kitchen display system

A kitchen display system is a digital connection between your restaurant’s POS and the orders waitstaff are inputting. It displays ticket times to keep track of turnaround, color-codes the orders to help staff see what’s cooking and lets staff manage incoming orders more effectively. 

Having a kitchen display system isn’t required, but you’ll find your POS hardware setup is more efficient with one, especially during high-volume periods. 

How to set up a POS system

The process for setting up a POS system or POS terminal depends on the type of system you have and your location. 

Generally speaking though, here are the steps involved in setting up a POS system:

1. Install the POS software on the hardware. This could involve downloading and configuring apps or software, depending on whether the system is cloud-based or locally installed.
2. Configure the system settings. This step includes adding products, prices, and tax rates to the system database.
3. Integrate with other business systems. If you’re using other apps in your business, you want to connect your POS to those solutions. They can include your accounting software, CRM, ERP, etc. 
4. Train staff on how to use the POS system. Make sure they understand all functionalities from processing transactions to managing inventory. 
5. Test the system. Run test transactions and perform other functions thoroughly to ensure all components are working together seamlessly and that data is accurately recorded and reported.
6. Go live. Start using the system for daily business operations.

Which POS is right for your business? 

The POS you choose has a big impact on how you run your business day-to-day, and how you grow your business year after year. 

There are a lot of options out there. We’ll help you find the right POS setup for your business. Talk to an expert to get started. 

POS FAQs

What is a POS transaction?

A POS transaction is the moment where a transaction is finalized or the moment where a customer tenders payment in exchange for goods and services. Any form of payment can be used, such as cash, debit cards, credit cards, mobile payments and even accumulated loyalty points. 

In order for a purchase to be completed, a PIN number, signature or for newer mobile payment technology, a fingerprint scan usually needs to be authenticated before an authorized transaction can be made. 

The authentication information from the PIN number or other security features then travels through the ATM networks until it reaches its destination–the issuing bank. At this point, the bank can either authorize it or deny it depending on the transaction type and the funds available in the cardholder’s account. 

Some US states and counties, like California and Westchester County in New York, require a customer-facing display at the point of sale. This allows customers to see the price of each item before they pay.

What is a POS register system?

Before on-site legacy POS systems, there were POS cash registers. Old POS registers have little to no technology—they can add up purchases and store cash, and little else.

Modern POS register systems are connected to cloud-based POS software. They include a cash drawer and a card payment terminal like an old clunky register would, but the POS software controls them (mostly—if you don’t have integrated payments, an employee will still need to push the payment back to the POS system. Integrated payments are more secure). 

They will have a receipt printer and a POS terminal—likely an iPad—and depending on the business type, may have a barcode scanner, a customer-facing display and the like.

What is a POS payment method?

A POS payment method is any way your customers can pay at a point of sale.

Common payment methods include:

• cash
• credit and debit cards, including tap, chip and swipe
• digital wallets, like Apple or Google Pay
• gift cards

Not all POS systems support every type of payment. Some require extra card reader equipment for swipe cards, which presents a barrier to customers without a chip card—you may need to turn someone away (and lose a sale) if you’re not prepared. 

A POS that can take tap payment methods will enable contactless payments. 

What does POS mean in restaurants?

In restaurants, the POS is the hub of your operations. It manages sales, payment processing, online ordering, inventory, staff management and more.

Without a point of sale, restaurants need to manage these functions individually, creating inefficient processes and potentially wasteful oversights. 

What are examples of POS systems?

POS systems come in all shapes and sizes (and experiences). Let’s look at three big names with distinct POS setups you could emulate with a cloud POS.

Most McDonalds now have self-order screens. Customers enter the restaurant, order their meal, then pay at a terminal at the screen or head to the front counter to pay in cash. The point of sale powers the self-order screens, the registers at the front counter and the connections to the kitchen display systems that let employees track orders. 

At fashion retailer H&M, shoppers bring their purchases to a central checkout counter where they’ll be scanned and bagged. The point of sale is located at the counter and stores inventory information, which is updated through barcode scans and physical inventory counts.

Apple has done away with a front counter entirely, having employees carry the POS system in their pockets. They use mobile devices with card reader accessories, full of inventory and customer data. Technically, the mobile devices are the POS system, but you could classify an entire Apple store as the point of sale—the POS comes to the customer, not the other way around.