Point-of-Sale (POS) Systems for Inventory Management
Track your inventory whether in the store or on the go.
A point-of-sale (POS) is the location where customers of a small business exchange money for the products or services sold by the small business. A POS transaction occurs when a customer buys or returns a product or service and occurs either at a brick-and-mortar store, on a mobile app, or in online checkout.
A POS system may be a simple cash register, a single computer, or an integrated computer network with point-of-sale software. It may also be a mobile device like a laptop, tablet, phone, or specialized terminal that can be used remotely for online sales transactions. POS terminals may be either stationary units tied to a computer inside a brick-and-mortar business, a mobile unit like an iPad, or a unit for online transactions.
POS systems may be used in a variety of ways. They are most useful for small businesses that sell products. POS systems that track inventory are especially useful in businesses that sell products or those use products they want to track in their production process. These systems are a useful tool in the toolbox of businesses that engage in inventory management.
How a Point-of-Sale (POS) System Works
POS isn’t a simple cash register or cash box world anymore unless yours is the smallest of businesses or a home-based service operation. Most businesses, even those providing services, need a more sophisticated cash management system in order to track sales, manage inventory, administer customer loyalty and gift card programs, and generate reports, to name a few.
If your business sells one or more types of products, or if it is a service-oriented business that uses inventory in its production process, you will quickly see that your business needs help tracking its inventory. If you sell online or sell away from your brick-and-mortar store, then investing in a good POS system can be worth its weight in gold to you.
IMPORTANT :- POS systems also make the no-contact transaction possible, whereby you don’t even have to handle the customer’s credit or debit card.
POS Systems in Retail Stores
POS systems are useful in retail stores, and are generally located where customers pay for the inventory they are buying from your store. At the least, a retail operation’s POS system needs to consist of a terminal, a scanner for barcodes, a credit card processor, and a printer for receipts. Useful features include:
Ability to Track Inventory
Nothing can drag down the profitability of a business like carrying the wrong amount of inventory. An inventory tracking system as part of a POS system can help a business know when to order inventory to prevent stockouts and how to avoid having too much inventory on hand, which can eat into profitability.
Generation of Sales Reports
Retail stores need to be able to view sales data on a weekly, monthly, or yearly basis. They should be doing industry analysis along with trend analysis to find out if their inventory management is hitting its mark.
Marketing and Customer Service
It is important for many retail stores to keep customer data on hand in order to make shopping a more personal experience. POS systems can do that for you while also giving you the ability to create advertising and marketing plans for your business. You can also use it for loyalty card and marketing programs like generating discounts and coupons for customers.
POS Systems in Restaurants
POS systems are often used in restaurants. Like retail stores, restaurant POS systems should have the ability to generate sales reports along with having strong marketing and customer service features. Restaurants need two additional features:
Back Office Inventory Management
Restaurants may sell a few products at the register. Perhaps more importantly, though, inventory management as a software feature helps with tracking your stock and supply. The inventory feature should also support tracking those items in the kitchen that are used in the production process.
Restaurant activity moves fast and fluidly. The POS system in the restaurant has to be simple and efficient enough to maintain and utilize while making reservations, ringing up orders and sales, and providing receipts.
POS for Inventory Management
Using the right POS system for managing inventory is one of the best decisions a business can make. Particularly in retail operations, but also for any business that sells products, inventory management using a POS system can save money for small businesses.
Inventory is the most expensive asset that a small business can hold. If businesses hold on to inventory too long, it may become obsolete. If they don’t have enough inventory on hand, the business is in danger of stocking out and damaging customer goodwill.
TIPS:- A POS system for inventory management can save money because it will tell the business owner when to order inventory and how much to order at a given time.
Here are some tips for using effective inventory management using a point-of-sale system in your small business.
Lower Ordering Costs
The cost of ordering inventory is one of two costs associated with holding inventory of the product or products sold by a small business. A small business cannot maximize its profit without continuing to keep ordering costs low. They include a portion of wages and benefits for the person ordering the inventory, administrative costs, and costs of taking delivery. A POS system helps keep ordering costs low by telling you when exactly to order.
Lower Carrying Costs
Carrying costs are the costs of storing the inventory. These storage costs can be expensive depending on the product. Considerations are whether it needs special conditions for storage and the size of the product. Not only can storage costs be high if you have too much inventory on hand, but you can also run into the problem of obsolescence. Both can be a drain on business profitability.
Perpetual and Just-in-Time Inventory Systems
A perpetual inventory tracking system records adjustments to inventory balances after every transaction through POS inventory systems. A perpetual inventory system allows you to access the balance in your inventory account at any time.
The just-in-time inventory system allows you to order inventory only as you need it. Both inventory systems may minimize the costs of ordering and carrying inventory.
Advantages of Using POS Systems for Inventory Management
Here are some advantages of using POS systems for inventory management:1
- Automates keeping track of inventory: Both small and large firms benefit due to the costs associated with carrying too much or too little inventory.
- Generates reports automatically: Both sales and inventory reports can be generated for any time period.
- Increases business profitability: By lowering the costs of carrying and ordering inventory, the profitability of the business will improve.
- Allows for remote management: If a business has more than one location, the owner or manager does not have to worry about theft of inventory since the POS system keeps track.
- Allows for dynamic inventory management: The use of POS systems allows for the business owner to use just-in-time inventory management or a perpetual inventory system.
- No-contact transactions: This is important now and in the future.
Hardware components of a POS system
These are the common physical components required to get your POS up and running.
Monitor/tablet: Displays the product database and enables other functions, such as employee clock-in and viewing sales reports. Tablets—especially iPads—are popular for replacing bulkier monitors.
Barcode scanner: Automates the checkout process. Scanning barcodes pulls product info and adds it to the checkout total. Barcode scanners can also integrate with inventory management systems to automatically adjust stock levels.
Credit card reader: Since the EMV payment standard went live in 2015, secure and EMV-compliant credit card readers are a must-have. Non-compliant retailers face potentially huge losses on account of fraud liability.
Receipt printer: Email and text receipts may be gaining popularity, but paper receipts remain essential for providing customers with a quick snapshot of their purchase or returns.
Cash drawer: It may fade away in years to come, but cash is still king. Until then, you’ll need a secure place to store cash for transactions. Another benefit of cash: there are no associated credit card fees.
Key features of a POS system: What to look for when buying
Many tasks in a retail store can be overly tedious and resource exhaustive. With the right POS system, retailers have the ability to simplify crucial daily business operations with greater proficiency.
“Modern POS systems do more than just offer flexibility when processing daily transactions,” says Grullon. “They improve a merchant’s chances of success by providing them with tools to streamline business processes.”
Here are several key features that retailers and restaurants should look for in selecting a POS system:
Sales Reporting: On the surface, most POS systems enable you to look at your sales. The difference lies in how those numbers are presented, the ease at which data can be accessed and how much detail you get.
Your POS system should ideally be able to:
- Generate detailed sales reports (based on product, hour, employee, total cost of items sold, total retail amount, net profit, profit percentage, gross margin)
- Provide quick snapshots and charts on your store’s sales performance
Inventory Management: One of the most important functions of a POS system, inventory management, at its very essence, keeps track of all products so you know when it’s time to order/or not order specific products.
Your POS system should enable you to:
- Scan and count products digitally
- Manage your stock by creating product variations (size, color)
- Identify pieces of inventory with a unique serial number
- Track inventory levels across multiple locations
- Enable seamless ordering such as automatically setting custom reorders of best-sellers
- Consolidate purchases and orders in one order
Customer Management: Building strong relationships with your customers will lead to repeat business. A POS should have customer relationship management (CRM) to track all customer data.
Your POS system should give you the ability to:
- Attach a sale/transaction to a customer
- Keep track of your customers’ purchase history
- Capture customer information such as name, age, birthday, phone number and email address
- Use email marketing to keep in touch with customers
- Create a built-in loyalty program (more advanced systems will have this)
Employee Reporting and Management: The performance of your employees can make or break the success of your store. Having the ability to set sales targets as well as know who your top performers are and who requires extra coaching will help increase sales.
Your POS system should give you the ability to:
- Add employees to your system
- Create and modify schedules for employees based on forecasted activity
- Email schedules to employees
- Track employees’ weekly and over-time hours
- Analyze who your top performers are
Choosing the best retail POS system: Questions to ask
If you’re choosing a POS system for the first time, start making a list of features you must have and talk to fellow business owners who are operating in a similar space. Ask what POS systems they’re using and what they like, or don’t like, about them.
“Then start looking at solutions and make sure vendors cover the key points important to your business while also offering a secure, easy-to-use, easy to maintain and modern solution,” says Tauzia.
Usability and agility is vital in a POS. “It’s important to consider ease of use, flexibility in pricing, what actionable insights the system provides, data security, hardware durability and quality of customer service,” says Grullon.
Once you start talking to vendors, be sure to ask questions that demand definitive answers.
Some questions to ask:Is the POS able to integrate with my existing software?
Do you have a website or accounting software? Choosing a POS provider that integrates with your existing setup will save you time and money.
What payment methods can the POS hardware accept?
Double check that the POS solution is able to accept chip-enabled credit and debit cards. You’ll also need to have an EMV-compliant POS terminal.
How much does the software really cost?
POS systems can cost as little as a few hundred dollars each month all the way up to tens of thousands for a made-to-order solution. Retail POS pricing guide for a full breakdown, including pricing models and ranges, unexpected costs to look out for, and pricing for popular systems.
Is your only option to sign a contract?
Signing on a dotted line means you’ll have to commit to the service until your contract ends, even if you don’t like it.
Are there any hidden fees?
Find out if there are any hidden fees involved in payment processing. These can come in the form of activation, downloads, early termination, refunds and transaction fees for different debit/credit cards.
Is any hardware proprietary?
Choosing a POS software vendor that offers proprietary hardware can save you time while offering smoother functionality. However if you’re looking to customize your setup, a proprietary solution can be restrictive as it’ll only be compatible with equipment from the same company.