POS Systems: Questions, Costs and Terms

Business.com / Financial Solutions / Last Modified: February 22, 2017

You should evaluate the best POS vendors in terms of hardware, software, and technology. Here are some questions to consider.

The variety of POS solutions and providers is really as diverse as the industries served. Manufacturers and developers may be a single entity to offer all-in-one hardware, software, and service packages, or may be assembled from various companies and offered by a distributor as an integrated package.

Value-added resellers may be independent agents or partners of distributors that design and support solutions comprising products from multiple manufacturers.

You should evaluate the best POS vendors in terms of hardware, software, after-purchase care, and technology.

Questions to Consider

  • What Are Your Needs? The size and complexity of the business dictates the size and complexity of the POS solution. The provider should have demonstrated expertise in your industry and be able to identify critical features and benefits that pertain to your specific needs. Will an off-the-shelf package satisfy, or do you have customized requirements?
  • Ease-of-Use? You and your employees must find the software intuitive and user-friendly. At the same time, the system needs to be functional to fit your requirements. Generally, the more complex your needs, the more features you'll require, and with that typically comes a trade-off in ease of use. However, complexity need not require a dedicated IT staff. The best systems balance ease of use and complexity to provide resources that are, with a little training and experience, not overly difficult to use.
  • What's the Track Record? The POS vendor should have a success story. If the vendor is a distributor or VAR (value-added reseller), what's the reputation of the products/services it resells? Who provides after-purchase support-the vendor, the OEM, or a third party? What disaster-recovery contingencies are offered, and what level of confidence is provided to ensure that both a computer crash as well as a physical catastrophe (such as a fire or flood) are covered?
  • Is the System Upgradeable? The advantage of many off-the-shelf packages is that they come with software upgrades to avoid planned obsolescence. If you do need to customize, ensure that customization does not come at the cost of an inability to incorporate new technology. Also, you might want to start with something basic and eventually grow into something more sophisticated. Make sure the system is easily expandable to grow with evolving needs.
  • What's the Level of Training? Training for you and your employees shouldn't necessarily be limited to pre-installation or the first day on the job. Also, once you're comfortable with the system, you might want to customize certain reports or incorporate advanced features. Make sure the POS vendor offers after-installation training to help you take full advantage of the system.
  • Is the System Secure? Visa, for example, requires all merchants to adhere to the Payment Application Data Security Standard (PA-DSS) for all credit-card processing transactions. Also, if the POS system allows for remote access, how does that access remain secure? What kind of password and user authentication system is used? Is a firewall in place to block unauthorized Internet access? Does the system come with virus and malware protection? Who manages security-you or the vendor?
  • Will the POS System Integrate with Other Business Systems? The advantage of a POS system extends beyond customer transactions to encompass a range of business reporting, accounting, and tracking functions. If you're just starting to automate, your decisions will be easier to make in this regard, as you have more flexibility to design the system. However, unless you're willing to entirely discard any existing systems, ensure that the POS system can seamlessly integrate with your other business systems. Otherwise, any theoretical gains in productivity are lost when incompatible systems can't "talk" to one another.

Calculating Costs

Systems can be leased or bought; some systems are free with a contract for a payment-processing agreement. Generally speaking, the more complex the system and the more terminals, the higher the expense. Basic cash registers can cost up to $500, but POS terminals can run as high as $4,000 each, with additional expenses for installation and programming, particularly if they involve proprietary software.

The good news is that, as with all forms of technology, systems are getting less expensive and more affordable, and even small businesses can take advantage of them. Also factor in that whatever the upfront costs might be, the return on investment in terms of greater efficiency and improved customer satisfaction make this type of purchase worthwhile.

Moreover, with the growing popularity of Web-based solutions, particularly for smaller businesses, there's a range of economical choices that can be fitted to popular smartphone, tablet and PC platforms.

POS Terms

Barcode: Randomly printed patterned spaces and bars (sometimes including numerals) that can be scanned into a computer to identify the product and related characteristics.

Cash Drawer: Connected to the POS terminal to store cash payments.

Central Control Unit (CCU): The computer hub to which all terminals are connected.

Check Conversion Service: Bank-provided service that allows processing of checks as a debit transaction; requires a check reader to scan and verify checks.

Customer Relationship Management (CRM): Usually refers to software that enables lifetime management of a customer's data, including analyzing that data for marketing opportunities. POS data often feeds into CRM systems.

EBT (Electronic Benefit Transfer): A card used to allow processing of state government benefits through a POS system.

EDC (Electronic Draft Capture): Provides the ability to automatically balance, settle, and authorize credit card transactions.

EDI (Electronic Data Interchange): Allows for purchase-order creation between a POS system and another vendor's system.

End-to-End Encryption: Protects consumer credit information by encrypting data transmitted at the point-of-sale and processed through the network.

PCI (Payment Card Industry): Guidelines designed to shield credit card information from fraud and misuse.

Peripheral: Any POS device, including PIN pads, check readers, card readers, barcode scanners, cash drawers, touchscreens, weight scales, and customer devices.

Perpetual Inventory: Constant monitoring and tracking of inventory in terms of quantity on hand and total value to continually reflect current receipts, returns, and sales reported in real-time.

PIN (Personal Identification Number) Pads: Part of a POS system that allows customers to swipe credit cards and debit cards, verify the amount charged, enter a PIN number or signature, and pay for a purchase.

Point-of-Sale (POS) System: A combination of software and hardware that facilitates commercial transactions, often including a credit-card reading device and/or a cash register.

Signature Capture Device: Component of a credit card terminal used to record a customer's electronic signature to authorize a transaction; eliminates need to maintain paper receipts.

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