How much do you know about point-of-sale systems? Not much, you might think. However, every time you pay with a debit or credit card, you experience a point-of-sale system.

The moment after typing in your pin number and the transaction goes through, the following happens: first, your account is debited and the payment transfers from your account to your retailer or service provider’s account. If your purchase is for a product, the product is given to you and debited from the stock system. Then, if the stock of what you have bought falls below a certain amount, the stock is reordered while accountancy files are updated in light of the new purchase you have just made.

This is a very basic overview of what POS systems do. They can be configured in any number of ways depending on the requirements of the business.

Before we delve into the core functions of a POS system, let’s get to know some of the history behind it. POS software as we know it today came to light in the early 1970s. It was developed by IBM who released the IBM3650 and 3660 store systems. These systems were the first to make use of peer-to-peer communications and networked cash registers across a local area network. Prior to these, electronic cash registers offered a limited POS facility, but due to their lack of networking were limited in function.

Dillard and Pathmark stores installed the systems in the US in 1974, with McDonalds installing a POS system built by William Brobeck and Associates in 1974. This system was more complex than its predecessors and was one of the first to make tax calculations. In 1986 Gene Mosher used a graphical user interface to develop a POS system. This was an early use of touch screens. The ViewTouch was the first commercial GUI product on the market.

Throughout the 1990s and until today, the systems were standardised with Microsoft, Sun Microsystems, NCR Corporation, and IBM coming together to make Unified POS. This is largely driven by the National Retail Foundation, the world’s largest retail association.

POS systems have a number of core functions. The main aspect to remember about POS systems is that they work on both the front- and backend of a business. When you make a purchase, the POS will facilitate payment. This allows for a quick and convenient transaction. Once the payment has been made, the backend of the system will debit stock and update accounting files accordingly.

Once the business begins to operate in a more effective way, its reputation will be enhanced

Depending on the complexities of the system, a POS system can automatically account for taxation and other costs, as well apply material resource planning for the debiting and reordering of stock. This saves time on many levels including accountancy and stock control and thus ensures a business runs more efficiently, as the chances of running out of stock are minimised. If the business carries stock on the shelf, the chances of losing a sale due to having no stock is virtually nil.

A good POS system will also improve customer service on a number of levels. By facilitating a smooth and easy transaction, a POS system allows customers to be on their way faster with no fuss. This provides a professional service to customers and in turn they are more likely to return to buy again.

The stock aspect is also important for good customer service and repeat business. If stock is on the shelf ready to be sold, customers will not have a need to go elsewhere. Should a business run out of stock a customer will be forced to shop around. They may return to a competitor next time they need to buy. This scenario can be avoided if a business has a good point-of-sale system in operation.

Stock management is also greatly enhanced using a POS system, which can be configured to order parts for repair or indeed complete products if an MRP module is installed. This also makes a POS system suitable for businesses which make money through repairs and servicing, as well as retailers.

To this end, it is possible to set up a product comprised of component parts. So should a business sell a product of this nature, the component part stock is debited. The configuration of an MRP system can use the product to determine re-order points, or the component parts can be used to determine reorder points. The possibilities are limitless.

Efficiency in accountancy can also be enhanced. A POS system automatically adds traceability to products, as well as applying taxation and other accountancy elements. This traceability is extremely useful, especially should a product range be comprised of valuable goods which can be stolen and sold illegally.

With accountancy being enhanced, areas of costs and money saving are more easily identified. This can make a business more profitable as it operates on a more efficient and cost effective plain.

Once the business begins to operate in a more effective way, its reputation will be enhanced. This is a cornerstone of branding and repeat business, which is probably why many businesses have integrated POS systems into their operations.

Good reputations are hard to cultivate and easily lost. POS systems make a positive impact to a business and reputation.

One of the reasons larger businesses opt for POS systems is that they can be integrated into one system regardless of the number of outlets. For instance, a chain of stores can all be run by one POS system. This way senior management can view profit and cost, stock turnover, and favourite items, per outlet. This puts them in a good place to make important business decisions, and to gauge the success of marketing campaigns and identify what sells in what stores. This optimises the profit each store can generate. This provides the best return on investment and the best returns for stakeholders.

With this in mind, distribution costs can also be reduced since, once an outlet has identified its most popular products, they can be bought in bulk and brought to a central hub.

Most vendors provide price breaks for bulk buys and by using a central delivery point, transportation expenditure can be saved. Products and stock can be distributed to the outlets as needed.

As well as identifying the best selling products, a POS system can also be used to spot trends. For instance, restaurant owners may spot that salad dishes sell well in the summer, while a toyshop chain may notice outdoor toys sell better in the summertime too. Conversely, a sports shop is unlikely to see skiing goggles fly off the shelf, but cycling products may well be in strong demand. All of this can be predicted when a good POS system is in operation.

Christina Goggi is a web marketing content specialist and a regular blogger on various tech websites.

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