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How to Use POS Data Insights

Donna Fuscaldo
Donna Fuscaldo
Senior Finance Writer

POS systems provide a plethora of actionable insights about your products, customers and employees. Here's how to use the data from your POS system to grow your business.

Small business owners who want to grow their operations need to think of their point-of-sale system as the hub of their business. A modern POS system collects an abundance of information about customers and sales that can inform future business decisions.

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What insights can a POS system provide?

Data from POS systems can tell you which products are selling well, when your business is the busiest, how an employee is performing and more.

Many business owners view a POS system as a "utility to collect payments and track transactions, but the real value is the business insight the POS unlocks," Vaughan Fergusson, founder and chairman of Vend, told business.com. "A modern cash register is good at collecting and recording sales. A modern POS system is really good at collecting all this rich information."

But before you can begin running reports on your business, you need to understand how POS systems collect data and what you can do with it.

What is a point-of-sale data analysis?

Every time a transaction is completed or inventory is added to your POS system, the terminal collects information about the product being sold and the customer buying it. A modern POS system can collect basic product information, customer preferences, and the time and date the purchase was made. The POS system also records whether the transaction occurred online or offline, at what price and which employee gets credit for the sale.

With that data stored in the POS system, you can run reports on the macro and micro levels, as well as get a deep view of how your business is doing daily, weekly, monthly and annually. That data provides valuable insights when you're forecasting for the year to come.

Through point-of-sale analysis, business owners can glean actionable information about sales trends, employee performance, inventory levels and the overall health of the business's operations. Because many POS systems integrate with other business functions, such as accounting or customer relationship management programs, you can get a complete picture of your retail business or restaurant from one dashboard.

"There is so much insight you can get from the data [collected by the POS]," said Alex Barrotti, CEO of TouchBistro. "It's essential to knowing how your business is doing." [Check out our full review of TouchBistro's POS system]

How is POS data collected?

The POS system collects data either passively or actively. With passive data collection, you aren't required to take any action; the system collects the data automatically. This type of data may include things such as the time a transaction occurred and the demographics of the buyer. Passive data can be used to build a profile of your customers, spot sales trends and determine if you need to reorder or abandon a particular product in your store or food item on your menu.

Active data collection, by contrast, requires you to collect information during the checkout process. This might mean asking a customer if they want to join your mailing list and entering their address into the system, or asking a customer to answer some survey questions after checkout.

Often, both passively and actively collected data resides in the cloud and is accessible via the POS system's dashboard. A retailer or restaurant owner can run general or specific reports on-site or remotely through their POS dashboard.

What types of data are available in a POS system?

Modern POS systems collect a ton of valuable information – so much that it's easy to get lost while running reports on various aspects of operations. Barrotti said it behooves business owners to categorize the data based on what matters most to their business instead of trying to make sense of it all.

"There are day-to-day activities – like what are my top-selling items, who is my best waiter or waitress and what is my busiest time of day," Barrotti said. "Equally important is profitability, and profit margin. Most point-of-sale systems should give you that level of insight."

Here are the four types of insights you can glean from your POS system:

1. Insights from sales reports

Sales reports are an essential part of a POS system, as they give business owners information about how a product is performing, what price it's selling at and when customers buy it most. A sales report can be basic or detailed depending on what insights you want to ascertain. The three most common types of POS reports are the sales summary, the sales report per product and the sales report by customer.

  • The sales summary gives you an overview of your sales at any point, such as the end of the night, week or month. It shows how much it costs to sell the product, your gross profits and your profit margins.

  • The sales report per product provides detailed sales information about a specific item. You can view how the product did at a particular time, what price it sold at, and if there are variations of a product, like size or color, that were in higher demand than others.

  • The sales report per customer is similar to the product sales report, but it's focused on the customer. The data can tell you which customers are purchasing a certain item and how much they're paying for it.

2. Inventory insights

It's important to stay on top of your inventory to ensure you can meet customer demand. POS data helps you do that by tracking your inventory in real time. The system can alert you when stock reaches a certain threshold and even automatically reorder the product for you. The inventory data the POS system collects can help you spot trends, better optimize your inventory and prevent items from languishing on store shelves or online.

3. Customer insights

If you spend a lot of time on unsuccessful marketing campaigns or product launches that don't resonate, your business could soon be in trouble. A POS system helps you optimize customer outreach by collecting data on customer shopping patterns, preferences and purchasing history. Running reports on customers via built-in POS customer relationship management software enables you to create customized promotions and loyalty programs and gauge how well your marketing efforts are faring.

4. Employee management insights

Whether you operate a restaurant or a retail store, your employees are your best assets. But if your employees aren't meeting your expectations or you hire too many people, those workers can also cost your business. With a POS system, you can get insight into your employees based on hours worked, sales rung up and the number of transactions, to name a few data points. By running reports on your employees, you'll ensure you are staffed correctly during your busy and slow times.

How do you use POS data for important insights into your business?

There are many benefits of using data from your POS system to inform your business decisions, but one of the most important aspects is the valuable information you can use to enhance your relationships with your customers.

Through the data your POS system collects, you can learn about your customers and their buying habits, and see how they change over time.

"The obvious insights when you build a profile of the customer is, you see the products they are buying," Fergusson said. "What is not too obvious is the trends. Is this product profitable? Are my customers' demographics changing over time? The real superpower is what you do with that."

Fergusson said it's becoming a growing trend within the POS industry to apply artificial intelligence to the software, to provide actionable advice based on the data the POS system collects. The most common example is the ability to set up the POS system for automatic ordering. With this feature, you set the threshold for each item and sync with your vendors, and reordering is automated.

AI is also being applied to loyalty programs that are accessible from a POS system. Based on information about customers' shopping habits, preferences and purchase histories, POS systems help you create loyalty programs and discounts geared toward your customers' purchases.

In the end, however, it's important to use this data to connect with your customers.

"Success isn't to get a customer in the store and buying a product; the real success comes from building a relationship with your customers," Fergusson said. "A digital cloud-based POS system is not only collecting information at your door; it's also re-engaging customers online or in your store."

Image Credit: jacoblund / Getty Images
Donna Fuscaldo
Donna Fuscaldo
business.com Staff
See Donna Fuscaldo's Profile
A lifetime New Yorker, I am a veteran finance and business journalist that has contributed to several national media outlets including Forbes, Investopedia, and Bankrate.com. I have spent my career providing consumers and business owners with advice and guidance to help them navigate the world of finance. As a senior finance writer, I report on all aspects of finance from managing cash flow to choosing the best accounting software.