E-Commerce Insights

POS Transactions: An Informative Guide

What is a POS transaction?

POS is an abbreviation for point of sale, which refers to any place where a transaction can happen, whether it’s for a product or service.

A POS transaction occurs when a transaction is finalized or the moment where a customer proceeds payment in exchange for goods and services. Any form of payment can be counted as a POS transaction, including cash, debit cards, credit cards, mobile payments, and even accumulated loyalty points. 

POS transactions can be divided into two major categories:

Online orders

As the name suggests, this transaction occurs when a customer purchases from an online store, more specifically when they enter their credit card details and the money is transferred to the seller. 

Offline orders

When a buyer visits a store and makes the payment for products/services at the cash counter on which a POS is installed, it is termed an offline POS transaction. With offline orders, the money is directly received by the seller without any delay.

The components of a POS system

Traditionally, a POS system consists of point-of-sale hardware and software. But thanks to the development of technology, or more specifically, the cloud-based server gives merchants more mobility when it comes to using the POS system.

Common types of POS hardware

Depends on your business type, what you need to run a POS system can differ. But here are the most popular ones that most businesses would have:

POS terminal

A POS terminal is the device that the mobile POS software runs on. 

Today, the terminal in a shop can be a laptop, desktop computer, smartphone, or tablet. In the past, the cash register was also the POS terminal. The new mobile devices allow staff to pick it up, move around the store, look it up for products and serve customers better. 

Credit card reader

The card reader helps the payment to proceed securely when customers shop in-store. There are three ways that the device can accept credit cards: reading the card’s magstripe; reading the card’s chip through an EMV; or using NFC (near-field communication) to accept payments from mobile payment providers (e.g ApplePay, Samsung Pay).

credit card reader
A credit card reader using NFC for contactless payment

Receipt printer

While a person can receive their receipt via email, a printed receipt is still pretty common for in-store shopping. The receipt allows a customer to keep a record of their purchase. 

Barcode scanner

Merchants use the barcode scanner to manage their inventory. It also helps them to quickly find the information about an item when the customer asks for it. The scanner can be connected to the POS terminal by USB or Bluetooth.

Cash drawer

Obviously, it’s used to keep cash paid by the customers. A cash drawer has several compartments for different coins and bills and is connected to a POS terminal via a USB or Bluetooth. 

Key features of a POS system software

Payment processing

This is the core function of any POS software. Each time a customer pays for their products, the software will proceed with the transaction, and the business can receive their money. There are 6 payment types that a POS can accept: cash, online payment, magstripe credit card, chip card, contactless payment, and card-not-present transaction (when you have to manually enter a customer’s credit card info).

Inventory management

The software allows you to keep track of the available and already-sold products. If the reorder triggers are set up, the system can notify you when an item is running low. It simplifies your inventory management process and reduces the workload involved. 

Customer relationship management (CRM)

You can create a profile for each customer from the POS CRM database. This way, you can keep a record of some information such as purchase history, payment information, and favorite products. Thus, you may analyze the data and plan a better way to serve your customers.

Employee management

Your staff can use this function to clock in and clock out of work. Moreover, you may schedule your employees’ shifts, track their working hours, and generate reports of their performance.

Omnichannel selling capabilities

Omnichannel is on the rise and it’s being adapted into the system by businesses, both online and offline. And to provide an integrated shopping experience, you should also pay attention to your POS system. 

For instance, when a customer shops in-store and asks you to lookup an item’s price, you can easily get to them and check the information with a mobile POS terminal. You can tell them not only the price but also other details such as how many are left in stock, whether it’s for sales or perhaps your store’s best seller. These kinds of information can increase your conversion rate as well as help deliver a better shopping experience. 

pos terminal
A shop uses a tablet as a POS terminal for more flexibility

Advanced reporting 

Asides from management, advanced reporting is also a very useful feature of POS systems. The system can generate reports on all aspects of your business so that you can make decisions to improve your productivity and bottom line. There are usually several preset reports for multiple purposes, and several POS software even lets you customize the reports to your needs. The more insights you gain from these reports, the better you can allocate your resources and cut off unnecessary spendings. 

Takeaway notes

A POS system is essential for all business types, be it a small shop or a large brand. It helps the business keep a close track of their accounting and financial situation, eliminating errors that can be made by humans, and support in other tasks such as inventory management or CRM. 

There are many different POS systems out there, and each may offer specific features that serve your business better than the others. So make sure you’ve researched before opting for the final one. The right POS system would assist you in running your business smoothly and growing it in the future. 


Content Writer. Love travelling, photography and have an interest in things business-related