How Do POS Systems Work?

Payments

Merchants use point-of-sale (POS) systems to take customer payments by credit card. Debit payments are collected immediately in a store that uses a POS system to run the payment. The terminals that are used in POS systems are typically connected directly to a bank that can credit the user's account and show payment on the merchant's books. A financial tracking system is connected to POS terminals through systems that process credit and debit card payments.

The merchant is charged a fee every time a POS system is used. Merchants receive additional benefits from POS systems, including the ability to display the transaction, calculate taxes and discounts and show payments made. Inventory can be attached to the POS system so that each item sold is automatically removed from the inventory report. Customer preferences, addresses and emails also can be included in the information provided by the software programs.

Equipment

POS equipment can print copies of the sale for the customer and the merchant. Exchanges and refunds also can be run through the system, and a copy of the transaction can be printed when a merchant has a printer attached to the system. Various merchant services companies provide printers that are either dot matrix operations or run by thermal imprinting. Although thermal printers cost about twice as much as dot matrix printers, they are faster and quieter. A thermal printer, which runs about $400, will last longer as well because there are fewer parts to maintain.

Merchants running POS systems usually attach a cash drawer to the system to hold the credit card receipts. POS systems also tie in cash payments through the same program and open the cash draw when each transaction is completed. Separate machines that read a credit card when swiped provide a keypad on which a customer can input a pass code or personal identification number. Infrared guns that read bar codes also are integrated into a POS system.

Merchant services companies often provide package deals that include all the required hardware while hooking you up through the financial system to process payments. You can lease equipment from these dealers or purchase your own devices.

Web-Based

Internet-based POS systems are used by businesses with multiple locations or absentee owners who can view the day's transactions from anywhere. Businesses with satellite offices track sales with connected POS systems, and franchises connect POS systems for individual franchise owners. A franchise corporate office often taps into the POS system that it developed for franchisees so it can track company-wide sales and build databases of consumer demographics to guide marketing strategies.

A POS can be attached to other company programs such expenses, payroll and staff hours. Many Internet merchant services companies offer data management and storage services as well. They can back up daily logs, load supplier catalogs as they become available and prepare mailings from customer data.

Resources

• POS Nation