What Is a Point of Sale Transaction?
If you're in business, you're trying to sell something. That means you need a way to process your transactions. The archaic means of doing this is by receiving cash and writing a receipt of the transaction. Although that is indeed effective in "processing" the transaction, using a point of sale (POS) transaction system is a much more effective means because the benefits of a POS system can go far beyond processing and recording a transaction.
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Definition
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A point of sale transaction is an exchange between a buyer and seller at a specific "place." This place can be a physical location, such as a store front or vendor's cart, or a virtual location such as a call-in number or website. The means through which a business owner captures the information related to a point of sale transaction is referred to as a POS system.
Types: Cash
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A point of sale transaction in which cash is used to pay for the product or service at a physical location is the most straightforward type of point of sale transaction.
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Types: EFT & e-Check
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Other forms of point of sale transactions are the electronic funds transfer (EFT) and the e-check. In both instances, monies are electronically transferred from a buyer's checking or savings account to a vendor's bank account. Buyers initiate EFT transactions from virtual point of sale locations but in certain situations, such as recurring payments, sellers may draw money from the buyer's account for subsequent payments due.
Types: Credit / Debit-Credit Card
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When a credit or debit card is used for a point of sale transaction that is conducted at a physical location, it's often referred to as a "card present" point of sale transaction. For these types of transactions, the buyer must present the card to be billed for the transaction so that the information contained on the card's magnetic strip can be recorded; the buyer can then be charged for the purchase. A signature is often, but not always, required for these types of point of sale transactions. The opposite of the "card present" point of sale transaction is the "card not present" transaction. All POS transactions that take place at a non-physical location using a credit or debit card fall under this category. In most cases, the cardholder must provide the credit card number, her name, the billing address, the card expiration date and the security code listed on the back of the card to complete this type of point of sale transaction.
Expert Insight
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Several point of sale transaction services, software and device options are available for business owners. However, some recommend that whenever possible, entrepreneurs choose a POS system that allows them to capture the point of sale transaction itself and its related information (item or service sold, price, quantity and method of payment) as well as demographic and product preference information on their customers. This results in better customer relationship management capabilities. The information can be invaluable in creating the strategy for how a business owner targets advertising and promotional efforts; it can also assist with building stronger relationships and the potential for repeat business with customers.
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