Point of Sale: How Does It Work

Point of Sale: How Does It Work?

The point of sale (POS) system is where transactions between customers and sellers take place. It serves as the central hub for processing payments, monitoring inventory, and generating receipts or invoices. In this blog post, we will delve into the concept of point of sale, its functionalities, and its benefits for businesses.

What is the Point of Sale?

The point of sale refers to the physical location or digital platform where customers make purchases, such as a restaurant, retail store, or e-commerce website. It is equipped with a computerized system designed to streamline the sales process and enhance customer satisfaction.

How Does a POS System Work for Small Businesses?

Small businesses utilize various hardware components, including computers, tablets, barcode scanners, card readers, and cash registers, to create their POS system. These hardware components are complemented by installed software that offers features such as customer data management, inventory management, and sales reporting.

Here are the general steps of how a POS system works at a small business:

  • The customer selects their items and proceeds to the checkout area.
  • The cashier scans or manually enters the items into the POS system, updating the sale and inventory.
  • The customer chooses their preferred payment method.
  • The cashier processes the payment using the POS system.
  • The system generates a receipt for the customer.
  • The sale information is recorded in the system's database for future reporting and analysis.

POS systems also assist small businesses in managing inventory by providing real-time updates and alerts for low stock levels. Additionally, these systems facilitate customer data management, allowing businesses to store contact information and purchase history for personalized service.

Types of Hardware and Software in a POS System:

Common POS Hardware:

  • Computer: The primary component used to manage the sales process.
  • Monitor: Displays the POS system interface for the cashier to enter sales data.
  • Barcode Scanner: Scans products and adds them to the sale.
  • Cash Register: Stores cash and coins and provides change to customers.
  • Receipt Printer: Generates receipts for customers.
  • Payment Processing Terminal: Enables cashiers to accept credit and debit card transactions.
  • Cash Drawer: Collects coins and cash securely.

Common POS Software:

  • Sales Interface: Graphically represents sales data.
  • Inventory Management: Displays inventory levels and sends alerts for low stock.
  • Customer Management: Records customer information and purchase history.
  • Reporting and Analytics: Generates reports on sales trends and other data for informed decision-making.
  • Payment Processing: Collects payments through various methods & reconciles transactions.

Choosing the Right POS System

Different types of POS systems are available, and selecting the most suitable one depends on a business's specific requirements.


Designed for larger organizations with multiple locations, these systems incorporate components such as barcodes, cash registers, and receipt printers.


Tailored for businesses needing on-the-go transaction processing, such as food trucks and pop-up shops. They often utilize mobile devices like tablets and smartphones.


Hosted on remote servers and accessed via the internet, these systems offer affordability, real-time data, automatic updates, and scalability. They are ideal for managing operations from anywhere.


Similar to mobile POS systems, these are fixed-location systems used in establishments like restaurants and coffee shops. They employ tablets, card readers, and other peripherals, and may offer features like table management and menu customization.


Geared towards businesses selling products and services online, these systems incorporate features like online ordering, inventory management, and shipping.

Point of Sale Transactions:

A point of sale (POS) transaction refers to the complete process that occurs during a retail or online purchase. To facilitate POS transactions, a POS card reader is typically utilized. This device is connected to the POS system and enables the processing of payments from customers.

During a POS transaction, the customer selects their desired items and proceeds to the register or checks out online. The cashier or system calculates the total amount owed, considering taxes, discounts, or promotions. The customer then makes the payment using various methods such as cash, credit or debit cards, mobile payments, or other electronic payment options.

Point of Sale Transactions

The POS system records the transaction details and generates a receipt for the customer. By leveraging a point of sale terminal, businesses can streamline the checkout process, manage inventory efficiently, and gain valuable insights into customer behavior and sales trends.


Understanding the point of sale and how it works is crucial for businesses of all sizes. A well-implemented POS system can streamline the checkout process, enhance inventory management, and provide accurate reporting. With Merchantech's POS systems, businesses can enjoy faster transactions, improved inventory control, and insightful reporting to drive their success.

If you have any questions about point of sale systems or wish to explore how Merchantech can assist your business, feel free to reach out to us. Thank you for reading!

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