June 7, 2021 | Categories: pos systems Back to list

What is a POS System and How Does It Work?

What is a POS System and How Does It Work?

A brick-and-mortar or retail business’ POS system is one of the most important parts of their company. Without it, it’s impossible for customers to pay for products or services. 

But what is a POS system? Why do you need one? Find out more about the benefits of having a POS system and how they work from Preferred Payments

What Is a POS System

Point of sale (POS) systems are the software programs and physical hardware that process and track customer purchases. They make it possible for your business to check out your customers and safely store and track your money. These days, POS systems include digital payment options that enable your business to simultaneously make, track, and manage transactions over a wide range of locations.

POS systems scale with the size of the company. For small and mobile businesses, a POS system may only be a single app with an external card swipe. For larger companies, they may consist of a computerized network of several checkout terminals with a wide range of hardware features like barcode scanners and card payment terminals. 

What Is a POS System Used For? 

A POS system makes it easier for a customer to make a purchase, and can also make it easier for you to manage your inventory and track sales. Think of a POS system like a digital cash register that helps a business make and track all customer transactions. 

Why Should You Have a POS System for Your Business? 

A POS system is important to your business because it does more than just ring up a customer. A good POS system streamlines your operations by automatically helping with merchant transactions and data analysis. It’s able to log, track, and access data to help you see sales performance and metrics in real-time. This will help you improve control over your inventory and give insights into your best-selling items. 

Most advanced POS systems also calculate and record taxes. They are enabled to manage taxes across states to make sure that you follow the requirements of each state you operate in. This makes it easier to be accurate and reduce errors in the tax process. 

How Do POS Systems Work? 

At its most basic level, a POS system is similar to a cash register. When a customer wants to buy something from your company, the POS system calculates the price of the item(s), the customer pays, and the transaction is finalized.

Modern cloud-based POS systems still provide that basic functionality but are also specialized to accommodate the specific needs of your business and your customers. In addition to facilitating purchases, they are able to help you track and manage your sales and inventory by providing detailed insights to your company. 

What Are the Three Different POS Systems? 

Each POS system is built for a different customer and user experience, with different layers of interaction and service. 

Desktop/Virtual Terminal

A desktop POS system operates from a computer or laptop or an on-premise system. It can look like a traditional cash register and may be connected to additional hardware like a cash drawer, barcode scanner, receipt printer, and/or card swiper. Also known as Virtual Terminals, these systems are designed to ensure your employees can provide the best customer experience while smoothly processing transactions. 


Compared to a desktop POS system, a mobile POS system is much smaller in size, while still providing the same benefits. Mobile POS systems are based on a phone app and an attached card reader. It is possible to use other accessories like barcode scanners and receipt printers, but the mobile POS system can function without them. 

Tablet POS is a type of mobile POS system that allows for a larger screen so images and graphics have better resolution, making purchasing easier for your staff and customers. 


A growing trend in some retail spaces is self-service POS terminals. These allow customers to make purchases without waiting for a cashier, which is becoming a more appealing way to shop

It also can help your business reduce the need for staff to help with processing a sale. It’s estimated that self-service kiosks will continue to grow and take a significant share of the market. A self-service kiosk POS is similar in setup to a desktop POS, but with additional security functions in both the software and hardware to protect the customer and your business. 

What Are the Two Types of POS Terminals?

If you’re trying to understand POS systems, you need to know the difference between terminals and systems. POS systems are the software that enables and tracks transactions, while the POS terminal is the physical hardware that facilitates sales. POS terminals can be categorized as mobile or fixed. 


Mobile POS terminals are designed for smartphone or tablet devices that allow you to manage your inventory and customer information from any location. These options are great for farmers’ market, fair, or event vendors, as well as freelance and contract workers. If your business does not have a set storefront and you are going to be traveling between locations, a mobile POS terminal is best for your company. 


Fixed POS terminals include everything from a traditional cash register to more modern tablet and cloud-based systems. Fixed terminals are stationary internal store terminals that can support a wide range of additional hardware options.

Why Should You Choose Preferred Payments? 

It’s not uncommon for small businesses to start with the cheapest and most basic POS system available to them. But as your business grows, your POS system needs to grow with it. You shouldn’t have to put up with high processing fees and underperforming POS systems, and that’s exactly where Preferred Payments helps. 

Preferred Payments can help you choose which POS system is best for your business and helps your business integrate. Merging with our payment processing will help you get the best value for your POS system.

Contact us to see how we can help by providing your business the support you need.

Get In Touch

Want to improve your payment experience?
Speak with a dedicated account manager today.

This field is for validation purposes and should be left unchanged.

Ready to get started?

Get in touch or create an account

This field is for validation purposes and should be left unchanged.