POS System and How it Works


POS System and How it Works

Operating a retail store needs a range of administrative and marketing skills. As the administrator, you need to keep checking on the inventory, preparing sales reports on a weekly or monthly basis. And this is on top of the general store management. Using a sound POS system not only simplifies these tasks but also automates your business.

But, you may be wondering, what is a POS system?

For starters, POS stands for point of sale. So, a POS system is an elaborate setup that processes payments by customers goods bought or services rendered while keeping a keen eye on the inventory. A point of sale transaction in every purchase takes care of everything related to the operation, including sales, bank or cash, and customer management.

A POS system has a lot of benefits for your business. However, most retailers are still stuck with old manual methods of using Excel, cash registers, and QuickBooks. But they don’t know what they are missing!

If you understand how the POS system works, its hardware and software components, and its capabilities, it becomes easier to decide as to why you need one. So, let’s take a look at how it works.

Components of a POS System

Without first understanding the parts of the POS system, it can be challenging to understand its importance to a business. Anyway, the POS system works just like your PC, and it can come with or without software. But it is best to get a system with a fully installed system. Even so, you can separately buy the various POS components.

POS Hardware Components

A complete POS system includes the following hardware components include:


Display – shows the product database and facilitates other functionalities like keying in the sales, displaying sales reports, and employee clock-in. It may be a monitor or only a tablet.
Barcode scanner – automate the product checkout process by reading the barcodes to capture information about the product. In most cases, the barcode scanner integrates with the inventory management systems to automatically adjust stock with each product checkout.
Signature Capture Devices – Modern POS systems create room for non-cash transactions. Your customers can pay in cash or alternative methods, including mobile cash tools like Apple Pay and Samsung Pay, or use Debit & Credit Cards, or even Bitcoin. It not only streamlines transactions but also minimizes the chances of errors and fraud associated with cash paperwork.
Receipt printer – Paper receipts don’t seem to be going out just yet. Regardless of the method of payment, a customer gets a receipt for their purchases. It gives them a glimpse of the transaction details.
Cash drawer: They say cash is king. Whether you accept other forms of payment, some customers will still pay in cash. Thus, it would help if you had a cash drawer as part of your POS system.
Network devices – Links the POS system to your network, regardless of whether your network is cloud-based or in-house.

Software Components of a POS System

POS software is what runs the system. Otherwise, the hardware on itself is entirely useless. The software determines the quality of your POS system as it dictates the entire system’s functions and capabilities. It is the brain that instructs the system how to implement keyed data.

You can go for on-premise POS or cloud POS software. Both need maintenance through frequent updates. In case of a locally hosted software, you may need an IT personnel to keep everything in check.

How Does POS Software Work?

The software does most of the work. An employee will log in, and all the sales done during their tenure will go to their account. It becomes easier to calculate commissions, just in case it is the basis of how you pay your employees.
An employee scans the items set for sale and the checkout point. These items are automatically deducted from the inventory and entered into the sales report of their respective category. And the customer attached to the sale is also identified. It helps in rewarding loyalty points and monitoring credit sales as well.

All these happen for every sale. Eventually, sales data amass, and it becomes easier to generate sales reports and the performance of your employees. Some systems even include analytics dashboards that help you compare periodic sales and returns through transaction reports and sale summaries.


POS systems are a perfect way to track your sales and monitor your employee sales. It not only helps you evaluate your business performance by tracking sales statistics and stock turnover rates. It generates reports that make your decision easier. Get a POS system today.

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