An angled shot looking up at two cafe employees, a woman and a man who both wear light blue button-up shirts and black aprons. The man is standing closer to the viewer; he is tapping something on the touchscreen monitor of a point-of-sale terminal. The woman is standing further away and is using a thin rod to stir something in a small silver teapot.
If your business has a brick-and-mortar location, you will need to invest in some kind of point-of-sale hardware, like a terminal or digital tablet, in addition to software. — Getty Images/Sunan Wongsa-nga

A point-of-sale (POS) system streamlines the checkout experience, allowing your small business to process payments, record customer loyalty points, and update inventory. POS vendors offer flexible solutions for brick-and-mortar and online companies. Although many industries use POS software and hardware, Grand View Research reported that retailers “held the largest share of more than 34.35% of the overall revenue.”

But how does POS software and hardware differ from a credit card terminal, and do you need one? We’ll cover what a POS system is, from components to pricing, how to choose one, and examples of top companies in the POS sector.

POS system: definition, purpose, and components

An electronic POS system processes payment transactions and logs purchases for accounting records. It replaces traditional cash registers or manual calculations at physical locations. E-commerce businesses also use POS platforms to facilitate and track online sales.

Point-of-sale software programs differ by vendor. Most track sales, print receipts, and run reports. Some let employees clock in and out. POS software may have built-in inventory management tools or integrate with third-party platforms. These systems often allow you to scan QR codes or barcodes during checkout and may update your stock levels.

Brick-and-mortar locations also use POS hardware. The main POS unit can be a standalone terminal, tablet-based system, or mobile phone. Other components may include a cash drawer, card reader, receipt printer, and barcode scanner.

Most modern POS systems are cloud-based, meaning the software resides on a web server, and the business doesn’t have to update it manually. A cloud-based POS can be fixed or mobile. A fixed solution sits on your counter, whereas a mobile POS (mPOS) is an app on a smartphone or tablet.

Grand View Research noted that small to mid-sized enterprises adopt cloud-based POS software solutions due to their “affordability and scalability.” These units work well for tableside or curbside checkouts.

[Read more: 5 POS System Features That Small Businesses Need]

Why small businesses need POS software

A POS system supports your customers’ preferred payment methods, speeds up checkout procedures, and is efficient. It also automates manual tasks like calculating discounts or processing a return. Most integrate with accounting and customer relationship management (CRM) programs, automatically transferring client and sales data.

Accepting electronic payments in-person and online is almost essential for modern small businesses. Indeed, a Pew Research Center survey found “roughly four in ten Americans say none of their purchases in a typical week are paid for using cash.” A credit card terminal processes payments, but its functionality stops there. Most physical stores want additional capabilities, like a database to view pricing information or customer accounts.

A centralized system provides reports about product performance, revenue, and profit margins. Small businesses use historical and real-time data to make informed decisions and identify trends. Multi-channel POS software allows retailers to manage sales across social media, e-commerce stores, websites, and physical storefronts. Using one system means you won’t book the same appointment time twice or sell items you don’t have in stock.

POS system pricing

The average cost of POS software ranges from free to over $100 monthly. The subscription fee varies by vendor and industry. For instance, Square POS is free and works for various companies. But food trucks may prefer Toast’s free Quick Start bundle, and full-service restaurants with online ordering and delivery may require Toast’s Growth plan, starting at $165 monthly.

According to, “Small retail stores can expect to pay $15 to $100 per month for a system with a single cash register.” Businesses can buy POS hardware for a one-time fee, use existing hardware (like an iPad or mobile phone), or lease equipment. Stripe said, “POS hardware ranges from $0 to $1,700.”

Most modern POS systems are cloud-based, meaning the software resides on a web server, and the business doesn’t have to update it manually.

How to choose a POS platform

The best way to pick a small business POS system is to choose one that’s purpose-built for your industry. POS software designed for restaurants will let you set a floor plan that looks exactly like your on-site layout, meaning there’s less chance servers will put orders under the wrong table. Likewise, POS tools for service-based businesses will support on-premise and online appointments.

Other considerations include:

  • Sales channels: Where does your POS need to work? Options may include your website, online store, physical business, mobile phone, social media, and marketplaces.
  • Integrations: What platforms should your POS connect to? These may include your accounting, inventory, e-commerce, invoicing, business phone, and CRM programs.
  • Hardware: Do you want a fixed, mobile, or combo system? Some POS vendors supply POS terminals, whereas others let you use iPads or tablets.
  • Features: What tools do your team and customers need? Create a must-have feature list to ensure you find POS software that fits your requirements and budget.

[Read more: Choosing the Best POS System for Your Company]

At a glance: POS vendor comparison

The account-based marketing firm 6sense tracks 230 POS systems. Square has the largest market share (28.87%), with Toast (23.10%) at its heels. Lightspeed, which sells retail and restaurant POS systems, has 8.43% of the market share, whereas Shopify holds just over 1%. TouchBistro, a niche favorite among restaurateurs, has less than 1% market share but ranks higher than Stripe or Lavu.

Here’s how a few POS systems for small businesses compare:

  • Square: This company offers free and paid POS subscriptions for retail, restaurant, appointment, or general use. Square has built-in payment processing and many add-ons and partner integrations.
  • Toast: The free version includes a complimentary terminal or handheld kit, ideal for cafes or food trucks. Toast’s paid packages offer flat-rate payment processing, mobile dining solutions, and menu management tools.
  • Lightspeed: This company has POS systems for retail, restaurants, and golf. Lightspeed provides one-on-one onboarding, 24/7 customer support, and integrated Lightspeed payments.
  • Shopify: Build an online store with unlimited products and payment processing, then choose from Shopify POS Lite (online-only) or Pro (for brick-and-mortar businesses).
  • TouchBistro: With front-of-house, guest engagement, and back-of-house solutions, TouchBistro’s POS plans provide everything you need to run your restaurant.

POS best practices for efficiency

Your point-of-sale system is a powerful tool with many features and available add-ons. It can help increase profits, reduce waste, and improve customer experiences when used correctly. But it’s vital that you and your team understand how to use it effectively.

Put your POS to work by:

  • Use your POS for multiple processes when it makes financial sense: A POS system can handle customer, inventory, loyalty, delivery, and gift card data, meaning staff can enter or look up information on one platform.
  • Integrate your POS software with business tools: Reduce manual data entry and generate more robust analytics by syncing your POS to accounting, invoicing, and CRM software.
  • Work with vendor representatives to learn the software: Take advantage of free training or customer support to learn about reporting options, user interface customization, and more to get the most out of your POS software.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.

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