Point of Sale Software
Published January 01st, 2017 by

What Is Point-of-Sale Software: Components, Functions, and Benefits

What Is Point-of-Sale Software: Components, Functions, and Benefits

Point of sale is the exact time when a transaction occurs. Many retailers acquire a point-of-sale system immediately after starting their businesses because it will be the heart of their operation. It is where everything will work together. For very small businesses, the POS system is a manual operation. It includes getting the money from the customer, packing the product, and then calculating change if there is any.

For retailers, there are those who use a POS software to make the point of sale quicker and more efficient. For businesses thinking of getting this software, here is a simple guide on what it is and what its components, functions, and benefits are.

Components of a Point-of-Sale Software

There are two categories when it comes to the components of a point-of-sale software.The first one is software components.

The software component is how the system will be installed. There are two ways for a software to be deployed.

On-premise is the traditional style of installation of the software. With this type of deployment, you have to pay for the software licenses upfront to be able to use and install them in your system. Because you already bought the software, any problems and issues after installation will be handled by you or your dedicated IT team.

Cloud-based or also known as software as a service. This type of installation is where you can rent or pay a monthly or annual subscription fee for the service that will be provided. The server used in this type of installation is based on cloud hosting.

The biggest difference between on-premise and cloud hosting is how their systems are deployed. For on-premise, the software will be installed on the company’s computers and servers. For cloud-based,it will be installed on the servers of the service provider. According to a study done in 2014, 69% of businesses are using cloud-based software rather than on-premise.

Another difference between this two is their prices. Cloud software is paid regularly, depending on the subscription basis that you have agreed with the service provider, while on-premise is paid only once for the perpetual license of the software. This is why when you get an on-premise software it is considered as a capital expense while cloud-based is considered an operating expense. You would also have to pay for your own maintenance under on-premise, while maintenance will already be included in the subscription fee you pay when using cloud-based hosting. Up-front, cloud-based software is cheaper than on-premise, but over time, if you compute the one-time fee for the on-premise software and the accumulated subscription fee for the cloud-basedsoftware, they might just be the same. But if you do not have the budget for an on-premise software right now, you could opt for a cloud-based one.

One benefit to using cloud-based hosting is that you can access the database anytime, anywhere as long as you have an internet connection. This is because the software is hosted on the Internet and can be accessed through a web browser.

On the other hand, when you use cloud-based hosting, security is handled by the software vendor. If you handle sensitive information, it might be better to invest in your own on-premise software. If you want to know more about using on-premise or cloud-based POS application, you can read POS software reviews to know which is better for your business.

The second component is the hardware. No matter what kind of deployment was used, the hardware will be the same.

Register screen. This will be the screen that will display the database of all of your products. In the register screen, you can also see the clock in of your employees and the sales reports. Currently, these monitors are being replaced by tablets or mobile devices.

Credit card reader. A secure card reader is required for an effective POS hardware. It should also be compliant with the standards of the EMV which were standardized October 2015. Retailers who are not compliant with EMV might face fraud liability cases.

Barcode scanner. The barcode scanner automates the process of checking out products.  When the barcode is scanned, all the information regarding the product will appear on the monitor, and then, the price will be added to the total check out. The best point-of-sale software integrates inventory management with a barcode scanner so that the inventory will be adjusted when stocks are bought.

Receipt printer. Traditional printers only print paper receipts, but recently, the popularity of email or text receipts is increasing. Some of the best points-of-sale software already offer digital receipts, which help in reducing paper waste. But it’s still a good idea to provide paper receipts so that customers will know what they have purchased at a glance. Using the receipt printer, you can also print sales totals of each of your employees, their hours, and other pertinent information.

Cash drawer. The popularity of using cards, whether credit or debit, is slowly reducing carriers of cash. But there are still people who prefer to use cash rather than cards so having a cash drawer is still important. An upside to using cash is that there are no added fees.

Functions of a Point-of-Sale Software

Here are the functions of a POS application:

Reporting and analysis of sales. This is a function of the software that captures and analyzes the sales data of your shop or store. Not only does the software keep track of your best selling products, but it will also show you how much gain or revenue you’re getting from each one. This will help you in analyzing which of your products are doing well and which ones are not. The software can also make recommendations about which products you should stock more and which product you could get rid of. This feature of the software will help with accuracy as compared to you doing the sales report manually.

Management of customers. Other than the best-selling products, the software can also identify which of your customers are the most loyal. With this information, you could give out rewards and promos for your most loyal customers. This will ensure that they will come back to your store, and when others know that you value your customers, they will hopefully transfer to your shop.

Management of employees. This function of the software will help in managing your employees effectively. That includes their schedules, time clocks and the hours that they are working. This will ensure that scheduling will always be done correctly and that no shift will be understaffed. This will make things easier for your employees too because they can have access to the schedule whenever they need to. The point-of-sale tool will also keep track of the commissions of each of your employees.

Management of inventory. As was mentioned above, inventory can be integrated into the POS system so that every time a product is bought the inventory will be updated. This will reduce time in doing manual inventory of all the products, and it will ensure that no lapses will be made. Inefficiencies are also reduced when this is done. Another benefit is that the software will inform you when your stocks are running low so you do not run the risk of running out of stocks.

Other than the functions mentioned above, here are eight more reasons you should start using a POS software.

Benefits of Using Point-of-Sale Software

Before we head on the benefits of using this software, check out this article for the advantages of POS software to retailers:

  1. If you have a lot of products, then your cashier has to memorize all of them. There might be times when you cashier will not be able to punch in the right price and you might lose some money. With the POS software, this wouldn’t have to be the case because the barcode scanner will handle all the prices to keep everything accurate. All reports generated by the software will also be accurate.
  1. Time saver. Imagine all the time you could save when processes in your business are automated. No need to count stocks manually anymore. The reports are generated automatically, no more need to bring up all the previous sales to collate the information. The software will do all these for you.
  1. The whole process of accounting will be simplified. There won’t be a need to sort through hundreds of receipts to make sure that everything is adding up. The built-in reports will handle this. Looking up specific transactions will also be easier. If you want to search for all the things you sold last Monday, all you have to do is to open the database, and everything you need will be there.
  1. Better customer relationships. When you use a POS system, the receipts printed are more itemized and detailed. This will be appreciated by your customers greatly. And another is that you can reward your most loyal customers as was mentioned above. You will get a lot of more repeat customers this way.
  1. One of the most important benefits of this system is the analysis feature. The software will be able to tell you when items need to be reordered, analyze patterns of sales, and other information that is necessary to make your business successful.

You now know the components, functions, and benefits of using a POS software. If you want to use this software, here is a guide on how to choose a POS Software.

If you are planning on shifting up from your cash register to a point-of-sale software, you can check out reviews and rankings of other users at

Our rankings are completely independent, transparent, and community driven; they are based on user reviews and client sentiment. These point of sale software companies had to earn their way up and didn't just pay their way up.

View Rankings of Best Point of Sale Software Companies