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Point-of-Sale Systems: Narrowing the Field

August 31, 2016 • 10 mins read

Ahmad El-Najjar

Policy and Communications

Point-of-sale systems are as inescapable for the small business owner as taxes. And, for that very reason, it’s important to know which point-of-sale (POS) system is best for your small business.

Choosing among point-of-sale systems can be an unpleasantly complicated task. Part of the trouble is that “POS system” can refer to anything from a cigar box and an abacus to endless rows of databanks in a sealed bunker. As you might expect, given that range of configurations, the challenge is finding a POS system that reflects the needs of your business. And even if you’re closer to the abacus-end of the spectrum, there are a lot of options, from the simple to the complex.

Point-of-sale systems: Which is best for you?

The first step in deciding which POS system is right for you is to understand thoroughly your needs as a small business. To do so, ask yourself questions like these, courtesy of the folks over at thebalance:

  • What tax must your business collect on a sale?
  • How many departments or categories that need tracking are in your store?
  • How many products do you carry now?
  • How many in the future?
  • How busy will your store be?
  • Will you need more than one register?
  • Will you accept coupons?
  • How will your clerks process refunds?
  • What types of payment does your business accept?
  • Will you do gift cards?
  • Will you have a loyalty program?

While you certainly can comb through Google’s 73,700,000 hits for “best point of sale system”—well, you don’t want to do that. Nobody wants to do that. In any case, more often than not, reviews of point-of-sale systems are paid for by the company that makes the system in question. Rather than suggesting any one system is the “best” or “perfect” for your business, we’re going to help you figure out what you need and how to find it from among your many, many (many) options. No one knows what you need better than you.

Basics of point-of-sale systems

Small business owners are offered countless services and technical solutions to every conceivable challenge, including ones they don’t have. Point-of-sale systems are no different. When searching for the right fit, it’s important not to get distracted by all the bells and whistles of highly technical point-of-sale systems.

Let’s start with the basics of a POS system.

Your POS system can be as simple as a shoebox for cash, a calculator, a receipt book, and a sales ledger. The minimum requirements of your POS system are the ability to process transactions and keep records. In other words, take money, sell stuff, keep track of it.

sad accountant
Luca Pacioli, famed Italian Renaissance accountant—would a POS system have made him happier?

Processing and recording transactions are the foundation of any small business, regardless of size or industry. So, what are your processing and recording needs?

Let’s take the example of a sole proprietor with no employees who owns a handmade candle boutique. Would this business owner benefit from a sales tracking software program built-in to an inventory system with a Customer Relationship Manager (CRM) database? Sure. Is it necessary? No. Remember, there’s nothing (or very little) these programs do that can’t be done with a pen, paper, and calculator. What these tools can do is save time, especially in high-volume sales businesses.

If new small business owners comprising some of the 22.5 million sole proprietorships out there find a licensed POS system out of their price range, they may be able to get by for a while with that calculator and some extra time.

Returning to the example of our candle-maker, let’s say the owner just wants to be able to accept money, give a receipt, and keep track of sales. What does that POS system look like?

No-frills point-of-sale systems

One common misconception about customer transactions is that a business needs to take both cash and cards. For a business that doesn’t sell anything over $100 – $200, taking cards is not a necessity. While it’s true that by not taking cards you may miss out on potential sales, if the cost of your goods and services are a significant percentage less than maximum withdrawal rate at most ATMs, and you’re not selling online, you can likely forego the added expense of processing credit cards.

In fact, many restaurants and businesses in NYC do just this, like famous pizza joint John’s of Bleecker Street. As John’s owner and New York native, Nick Sitnycky points out, “The advantage is that there are no fees.” Some go a step further by hosting an ATM inside their business, to make getting cash convenient for their customers. That’s what Sitnycky of John’s did to reduce the probability that a diner would skip out on the tab. “When people walk to the corner for the ATM,” he notes, “there’s no guarantee they’re coming back.”

If you are a cash-only business like John’s, you don’t need to contract with a Merchant Service Provider (MSP) and pay equipment or transaction fees, which average 2.1 percent per transaction. That can put quite a dent in the bottom-line. Essentially, being cash-only can be done with a lockbox and change bag and you can get started making money right away. Alternately, you don’t want to create barriers to purchases. The trick is to find the right balance for your customers.

For many small business owners, Square has become the go-to Merchant Service Provider (MSP) as it’s simple to setup and to use. While we don’t endorse any MSP specifically, Square is a good baseline for processing credit cards. They charge a one-time $29.99 fee to purchase their credit card reader, which you plug it into a smartphone, iPad, or other tablet. That’s all the setup—you’re good to go, at a 2.75 percent fee per transaction. Square may not be the best deal if you’re a high volume or big ticket business. But for small businesses doing under $10,000 in sales per month, it can be an easy solution that won’t break the bank.

damn fine cup of coffee
image courtesy of John Morton, Wikimedia

The above example can work for restaurants, too. Let’s say you’re a diner that only serves two things: cherry pie and coffee.

You’re in a situation akin to our candlemaker friend, in which you have only a few items to account for, manageable inventory, and no big ticket items. If the local population is, say, 51,201, you’re not dealing in high volume, either. You can probably get by with just a cash register, a notepad, and a ledger.

For good or ill, very few businesses fit those profiles. The reality is, with online sales, the reliance on plastic for purchases, managing inventories, increasingly complex tax reporting, and a slew of other 21st-century criteria, the pen and paper route isn’t enough for most businesses.

Key features of point-of-sale systems

Given that not many businesses are able to just start taking cash, abacus and clay tablet at the ready, let’s look at what some minimal requirements are for a POS system.

Every business needs to consider:

  • cost, including monthly fees and swipe rates
  • inventory management
  • tools specific to your industry, such as online ordering for restaurants

In addition to the three essentials above, Business News Daily suggests considering the following features when evaluating point-of-sale systems:

  • ease of setup and use
  • hardware requirements, such as touch screen, desktop, tablet, or smartphone
  • backend features (inventory management)
  • built-in solutions, such as customer relationship management (CRM) software
  • e-commerce integration
  • contracts and service terms
  • merchant services
  • customization options
  • third-party integrations
  • reporting and analytics
  • service limitations
  • manufacturer’s customer service

The necessity of many of the above items will depend on your own business structure and personal preference.


point-of-sale systemA point-of-sale system can be as cheap or as expensive as you want. The bootstrap small business looking to process credit cards but still do all their own inventory tracking and bookkeeping might not need more than that one-time $29.99 equipment purchase from Square.

Of course, as you start adding services, the price goes up. Built-in CRM, the ability to split restaurant tickets, marketing software, accounting software, reporting capabilities…the list goes on. The price range can run anywhere from almost free to thousands of dollars.

Still, it’s always good to have a baseline when reviewing any purchase. Here’s a ballpark of the spectrum for a few industries, courtesy of

You’ll notice immediately that some of these have monthly rather than flat fees. This is because many point-of-sale systems use cloud storage for their back-end systems and software, making it necessary to purchase a monthly subscription to use their services.

The most important piece of advice we can give here to the new business owner is to purchase what you needs with a very conservative estimate of your projected revenue in mind. Many of these flat fee and month-to-month services have equipment fees, leasing contracts, and contracts for services that can lock you in. If you end up in a pinch financially, that will be trouble. The great thing about a business is you can always grow; your POS system should work the same way. Get the right system for where you expect to be no further than a year out, rather than the system for the business you hope to have. That’s what upgrades are for.

Inventory management

Inventory. You never want too much but you also never want too little. Keeping your eye on inventory is another function fundamental to a POS system. Whether you want to go the cheap route and count your stock one-by-one or you want an integrated sales system that automatically deducts from your inventory and re-orders automatically, there’s a POS system that’s right for you.

card readerYour POS system is the front of the house, so to speak, where all your financial transactions occur. Having an inventory system in your POS that automates tracking and updating inventory according to what is being purchased will be worth the cost for some businesses. It may not be a huge time-saver for someone selling a limited number of goods, but if you’re a retailer or restaurateur with hundreds of items on for sale or on the menu, a POS system with built-in (or the ability to integrate third-party) software for inventory can be a lifesaver.

It’s good to know whether or not third-party software or software integration is an inventory feature you need. Third-party integration can mean substantial savings, if you find software that fits your needs. Keep in mind, however, that there are numerous open-source inventory tools available online that are completely free. Many of these can be integrated into POS systems. Do your homework on this and make sure you’re not paying more for a service you can find elsewhere more cheaply. (Minus the headache of installing the software, of course).

Industry-specific systems

We’ve been comparing POS features mostly for retailers and restaurateurs, but we don’t want to leave out our professional service providers.

For many of you in the professional services industry, the one thing you need to track most, after payments, is your time. Especially if you’re a one-person operation, you can probably avoid any of the bigger POS system packages and rely instead on a much simpler payment process. Many service providers, such as plumbers, electricians, handy-people, and fitness instructors, simply use available tools like PayPal, cash, or even the Square card reader.

However, like it is for our retailers and restaurateurs, it’s all about scale. If you’re a contractor with an inventory of lumber, pipes, cement, tools, and various sundries, it makes sense to track what you use and what you need. That’s when a POS system can come in handy. Similarly, if you’re a service provider with a retail location, like my neighborhood locksmith or shoe repair person, then you also likely have goods you sell along with your services. And you’ll need to keep track of those.

Retailers and restaurateurs are more likely than their counterparts in other industries to find a POS system that matches your industry. Both retail and restaurants should look for is the degree of specialization in a POS system. For instance, if you’re a retailer and want to have an e-commerce component, than you’ll need a POS system that integrates with your online store.  Alternately, a restaurant may want to offer an online reservation system through their POS system. It’s all about distinguishing between your need-to-haves and want-to-haves.

Choosing the right point-of-sale system

We know there are a million things that need your attention at every stage of your journey as a small business owner. Choosing a POS system is going to be one of those things that demands a significant amount of time, since you’ll be using it every day. You need to make a decision based on due diligence—and with which you’re comfortable.

If you’re exploring options or interested in getting honest feedback on the various POS systems available, be sure to ask your Townsquared neighbors. Odds are, someone will have tried the system(s) you’re considering. That connected small business community is an additional resource to which Townsquared members always have free, 24/7 access.  


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