Point of Sale

Point of Sale (POS) Definition

Point of sale (POS) refers to the payment counter in a retail store where customers pay for their purchased goods. For example, the counter at McDonald’s where you place an order and also pay for it is an example of a POS. The desktop on which the staff keys in your order and payment details is a part of the POS terminal.

Likewise, POS can be found at restaurants, hospitals, gas stations, hotels, etc., to allow a space for customers to pay their bills. The payment page of an online transaction is also a POS example. POS is a vast world in itself, allowing efficient management of the business data, inventory, and customer relationship.

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Key Takeaways
  • Point of sale (POS) is the spot where a customer makes the payment for goods purchased in a store. To simplify, a POS is the point of purchase where orders are processed, bills are generated, and customers pay for their purchase.
  • Customers can find a POS system at retail stores, restaurants, hospitals, gas stations, hotels, etc., to allow a space for customers to pay their bills. The payment page of an online transaction is also a POS.
  • The POS system allows the processing of payment transactions, recording of transactions, inventory updates and various other things depending on the software features.
  • A point of sale system and terminal are usually made of machines such as a desktop, POS software, scanner, debit/credit card machine, and printer to facilitate a transaction.
  • A POS system is known for streamlining the sales processes, tracking sales and inventory as well. It also helps in recording business data, automation, inventory management, and boosting customer relationship.
  • POS system throws up more positive effects by allowing better analytical thinking and planning by the retailers. In recent days, cloud-based POS systems are gaining popularity

How does POS System Work?

As discussed above, a POS enables a business to accept payments from customers and track sales. It keeps track of different data related to a business. Think of a payment checkout counter at a store. The counter displays a point of sale system and terminal. The POS system refers to the place where the customer makes the payment. The system allows the processing of payment transactions, recording transactions, inventory updates and various other things depending on the POS software features. 

A POS terminal is usually made up of a desktop, POS software, cash register, scanner, debit/credit card machine, and printer to facilitate a transaction. There are various layers to the concept of POS; let us start by taking a simple example.

  1. A customer decides to buy a product or service in a physical store. A sale associate now initiates the billing. The associate uses a bar code scanner to know the product’s price. This step happens when customers have completed adding items to their cart and click the checkout icon during online shopping.
  2. The item’s price, inclusive of the sales taxSales TaxThe government levies sales tax on the consumption of various goods and services as the percentage added to the product and services from which the government earns revenue and does the company's welfare. In the United States, 38 different states have different taxes, from Alaska (1.76%) to Tennessee (9.45%).read more, is calculated by the POS system. And then, the inventory count is updated, indicating that the item has been sold.
  3. Thereafter, the customer pays using a means of payment. Apart from cash, a customer can pay using a credit card, tap card, or debit card. Some stores offer payments using PayPal, loyalty points and even gift cards.
  4. Once the customer’s bank authorizes the transaction, the store receives the money. With this, the POS transaction gets completed.
  5. A digital or a printed receipt arrives as the payment goes through. Thereafter, the customer is free to leave with the purchases.

Point of Sale Features 

  • A business generates data on sales, returns, regular customers, high selling products, seasonal preferences, low selling products, reorder points, low inventory, top employees, returning customers, etc. An efficient POS system will help compile this data to help the management make crucial decisions regarding inventory, marketing, employees and customer relationship.
  • The POS database and software integrates all the data of a business. For example, a brand with its stores across different cities can compile all the data from all its stores and warehouses using an efficient POS system or software.
  • The POS terminal comprises a server, desktop, a credit/debit card swiper, a drawer for cash and a printer for bills. Based on the business type, one may choose a bar code scanner or other specific customizations.
  • The POS installation company sets up your system, including all hardware and software. The staff usually undergoes training to be able to handle the system.
  • POS transactions occur in a retail store, restaurant, hospital, hotel, online shopping and the like.
  • There are different POS systems such as counter POS, mobile POS, online POS, tablet POS, etc. Depending on whether one runs an online store, have a physical store, or both, one can decide upon the type of POS system.
  • A mobile or tablet POS will reflect that one can pay for purchase anywhere in the store or the restaurant without the need for wires. This portability is the result of a cloud-based POS system.
  • The cloud-based POS systems are pretty advantageous over other POS as they process and store sales data online instead of locally on a computer server. They are often referred to as the point of sale applications (apps) since they often find their usage on mobile devices. Alternately, mentioned as an electronic point of sale (EPOS).
  • The market is full of different POS systems enabled with varying features. Apart from the basics of sales and inventory record, many are designed to help with report generation, customer relationship management, loyalty program, automation, reorder point, employee performance data, cost-cutting and profit generation.
  • It is imperative to find one that suits your business. Although, experts have warned businesses and customers of POS frauds as card transactions are a magnet for cyber-attacks. In 2019, VISA talked about how malware tried to gather card details from a gas station POS system. As such, merchants must ensure a system that ensures data safety.

Point of Sale POS Examples

  • There are plenty of real-life examples of POS. We pay for an online shopping order on Amazon due to the POS software.
  • With cashless drives and the Covid-19 pandemic, the global electronic POS market is expected to reach 2 Million Units by 2027.
  • POS at a café, bar and hotel is a common sight. Sometimes, it’s a payment counter for billing. Other times, it is a cloud-hosted POS software such as Toast POS allowing payments on mobiles and tabs.
  • Other common examples include a hospital, a gas station, retails stores, salons, etc. The salon POS comes with scheduling and appointment facilities.
  • Many merchants allow for POS financing as well. POS financing is usually taken while purchasing expensive items such as a diamond ring. Using POS financing, one can pay for the purchase in EMIs. Forbes lists Affirm, Afterpay, Klarna as some popular sources of POS financing.
  • Square, TouchBistro, Poster POS, and Vend are some famous point of sale systems or softwares. Vend is a hybrid version of web and mobile.


Using a POS system increases business efficiency. Recent developments in digital technology have made POS systems to integrate with other business tools. It has the following benefits for businesses:

  • Involves sales and inventory tracking, thereby providing insights into your daily-based revenue. It lets you know when to reorder your stock.
  • Analyses customer, sales, employee and inventory data and presents them as reports. For example, one can identify the highest selling items that can be marketed well for further sales and always remain in stock.
  • It can help with customer communication and relationship. For instance, having updated information on regular buyers helps in creating a loyalty program to generate more profit from them.
  • It saves time on managing the company’s paperwork due to automation. It also saves wastage and cost.

Frequently Ask Questions (FAQs)

Here are the most frequently asked questions on Point of Sales (POS)

What is a point of sale transaction?

A point of sale transaction occurs when a customer pays for a purchase in a store using cash/card/mobile or while doing online shopping using net banking or payment gateway.

What is a point of sale system?

A point of sale system is where a customer makes the payment. A POS system could be the payment counter, online shopping checkout page, self-payment kiosk, mobile POS, tablet POS, etc.

What is a cloud POS?

A cloud POS is entirely a web-based POS system that allows you to process payments through the internet. Cloud-based POS systems support all payment transactions and updates online and store data in the cloud, rather than holding on to your local computer.

This has been a guide to What is Point of Sale (POS) and its Meaning. Here we discuss how POS software systems work along with features, examples and advantages. You may also have a look at the following articles to learn more –