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How Do POS Systems Work?

To really appreciate the power of current POS systems, it helps to take a look back at what came before. Not so long ago, retailers relied on cash registers to record and track sales. They were little more than adding machines with a cash drawer. 

Cashiers check purchases for a price tag and punch the number into the register. When all items were entered, pressing the “Total” key added up all of the purchases and produced a sales receipt.

Each register was independent of others. Usually, the paper roll in the register was the only record of transactions.

POS Systems

Conversely, with the advent of digital and even cloud-based systems, today’s POS systems are so powerful and feature-rich, they are almost incomparable to a cash register

  • Barcode readers mean automatic recording of each item in a purchase without manual price entry.  In many cases, they eliminate the need for a cashier.
  • Transaction details are stored electronically and can be accessed directly by back office systems.
  • The system adjusts inventory, across the store or even entire chain, with each purchase
  • Other transactions, including couponing, refunds and more, can all be made on a POS terminal
  • Operators can update the system electronically including new features, pricing or system fixes

Components of a POS System

Every POS system is a combination of computer hardware and software. 

On-Premise and Cloud-Based

A POS system can be based on-site, or may be hosted online using cloud-based servers. On-site systems must be licensed, updated and maintained independently. Conversely, cloud-based systems will track sales and inventory across an entire chain or region, and may be updated and maintained from a central location. But they will need reliable internet connections.


POS software includes front-end, interfaces at the p[oint-of-sale. This allows the cashier to enter transaction data or for it to be entered by the purchaser using barcode readers or RF devices.

The front-end software interfaces with back-office systems including inventory management, accounting and analytics. 


Different types of businesses will need hardware requirements. For example, restaurants use mobile devices to record and accept payments at the table. The most common POS system components include the following.

  • Front-end Interface – This could be the POS terminal, self-checkout terminal or mobile device.
  • Cash drawer – Usually only on POS terminals where cashiers are present
  • Printer – For printing paper receipts
  • Barcode reader – To scan barcoded products
  • Card reader – To read the data on a credit card, debit card or other cards with a magnetic strip and/or data chip.

Which POS System is Right for You?

It all depends on your business and your preferences. Again, the type of business may dictate your hardware configuration and software requirements. You may prefer the convenience of a cloud-based system, or want to keep everything on premise. Talking to a reliable POS systems specialist will help you find the most efficient, effective and valuable su=ystem for your business. 

To learn more about POS systems, check out our recent article 5 Most Common POS System Issues.

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