POS systems for small business

Process payments, track transactions and manage inventory with a POS system

We look at what a POS system is, how it works, and what to consider when choosing a point-of-sale system for your business
Fact checker
Last updated
November 29th, 2023

What is a POS system? 

A POS system is a combination of hardware and software that work in tandem to process payments and record sales, either in person or online. 

There are several types of POS system:

  • POS Terminal: A basic system designed primarily to process credit and debit card payments in a compliant and secure way.

  • Retail POS system: A more fully featured system that can record details of sales as well as process payments and is designed for use in physical locations like stores or pop-up shops.

  • Restaurant POS system: This may include additional features like table management, kitchen display systems and online ordering.

  • Mobile POS system: This is a software-based POS designed to work with a regular mobile device, such as smartphone or tablet. 

  • Cloud POS: this is hosted in the cloud and is increasingly popular due to the fact it’s relatively easy to set up and deploy, with easy access to your data.

How does a point-of-sale system work?

Point-of-sale systems provide you with the means of taking, processing, and recording payments. Most follow the same process:

  • A customer puts products into their shopping basket (virtual or physical) before taking them to the checkout to purchase.

  • The POS system adds up the total value of the shopping basket, adds any relevant add-ons (such as VAT or postage), applies any discount vouchers or codes, and then presents the customer with the final amount to pay.

  • The customer pays using the POS’s payment processing system – this might be with a debit or credit card (swipe, contactless or chip and PIN), a mobile payments system, or with cash.

  • The transaction is logged (including its date and time) and completed: the customer receives any change if paying with cash, along with a receipt, which may be printed out or emailed to them.

POS systems can also do much more behind the scenes depending on what features they provide, such as updating your store’s inventory after each purchase, applying loyalty points to the customer’s account, or providing reports and analysis into recent sales.

POS systems can much more behind the scenes depending on what features they provide, such as updating your store’s inventory or providing reports and analysis."

Do I need a POS system?

Point-of-sale systems are a vital tool for any business who wants to boost trade through supporting the full range of payment methods. Whether you’re a sole trader selling handmade goods at craft fairs, a newly established business on the high street, or a busy restaurant or bar looking for ways to simplify payment for your patrons, there’s a POS system to suit you.

How consumer behaviour is changing 

UK consumers continue to gravitate away from paying in cash, and in 2022 a milestone was reached when half of all payments were made using debit cards compared to just 14% with cash, according to UK Finance

POS systems are constantly evolving to match changing habits too, making them a vital investment for any business wishing to take advantage of the 87% of adults who made at least one contactless payment per month in 2022, or the 30% who have signed up to at least one mobile wallet service such as Google Pay or Apple Pay.

% of adults that made at least one contactless payment per month in 2022[1]
87%

Types of POS systems

POS Terminal

A basic system designed primarily to process credit and debit card payments in a compliant and secure way.

Retail POS system

A more fully featured system that can record details of sales as well as process payments and is designed for use in physical locations like stores or pop-up shops.

Restaurant POS system

This may include additional features like table management, kitchen display systems and online ordering.

Mobile POS system

This is a software-based POS designed to work with a regular mobile device, such as smartphone or tablet.

Cloud POS

This is hosted in the cloud and is increasingly popular due to the fact it’s relatively easy to set up and deploy, with easy access to your data.


Types of POS systems

POS Terminal

A basic system designed primarily to process credit and debit card payments in a compliant and secure way.

Retail POS system

A more fully featured system that can record details of sales as well as process payments and is designed for use in physical locations like stores or pop-up shops.

Restaurant POS system

This may include additional features like table management, kitchen display systems and online ordering.

Mobile POS system

This is a software-based POS designed to work with a regular mobile device, such as smartphone or tablet.

Cloud POS

This is hosted in the cloud and is increasingly popular due to the fact it’s relatively easy to set up and deploy, with easy access to your data.


How to choose a POS system 

Which point-of-sale system you choose depends of course on what you need from it, whether it’s a simple payment terminal or a more fully rounded sales tool.

POS hardware

POS systems come in all shapes and sizes. Many are available as single-purpose devices or as add-ons, while others like POS terminals combine multiple features in a single unit:

  • Payment terminal: This simple device connects to your smartphone or system to process payments using cards or mobile wallets. Make sure it includes protection against fraud and offers PCI and EMV compliance.

  • Barcode scanner: Speed up transactions by scanning items by barcode to process them.

  • Receipt printer: Provide customers with printed receipts if they want one.

  • Customer displays: Allow customers to view their order and payment information.

  • Self-ordering kiosks: Let customers browse, purchase, and pay for their items from a single terminal – as seen in Argos or Burger King.

  • Secure cash drawers: Securely handle cash at the point of purchase.

POS Software

In most cases, POS software is included with the hardware. There are two basic types:

  • On-premises software is tied to a single POS terminal (but can be synced to accounting software) and works best in smaller outlets that prioritise in-store sales and don’t require advanced features. 

  • Cloud-based POS software can sync information from multiple terminals, making it a good choice for larger stores or those that mix physical and online sales.

When evaluating POS software for your business, look for the following features:

  • Payment processing: Choose a system that supports a wide range of payment types and providers.

  • Receipt printing: Either printed or emailed.

  • Returns and refunds: The ability to cope with returns, such as updating inventory and issuing refunds or credit notes.

  • Inventory management: Including updating store inventory as purchases are registered.

  • Reporting: Make you get the insights you need – for example, by allowing you to track sales by individual employees.

  • Customer loyalty: Look for tools offering loyalty points, vouchers, gift cards, and more.

  • Training and support: What help is provided in getting set up and using the system? Is there real-time support available to deal with problems when they occur? 

  • Easy access: Is the POS information tied to one machine, or can you access it from anywhere via the cloud?

  • E-commerce: Can you combine online with offline sales with just one platform?

  • Third-party integrations: Look for POS software that links to relevant systems like accounting, CRM or email marketing platforms.

  • Business-specific features: For example, bookings and appointments for restaurants or hair salons.

Also look out for specialised POS systems tailored to specific industries, such as restaurants and hospitality.

How much do POS systems cost?

The price can vary widely between POS providers and systems depending on what you need. Costs can be divided between three segments:

  • Hardware: Expect to pay £20-50 for a simple card reader, £300-£1,000 for a full POS terminal, and £75+ for add-ons like barcode scanner or secure cash drawer.

  • Software: Some solutions can be bought outright for as little as £30 for an entry level package, but most providers include the cost of their proprietary software in their fees. Some offer multiple tiers depending on the features you need.

  • Payment processing: The cost of processing each payment, whether online or in-store.

Common payment terms

Monthly fee: A charge made by some POS providers to cover the costs of using their software and – if included – hardware. Expect to pay around £25-£70 per month for a package aimed at small businesses that includes software but not usually hardware.

Transaction fee: This is a charge levied on every transaction – typically around 1.5-2.5% of the total cost, but sometimes also accompanied with an additional flat charge for certain types of transaction (such as online purchases). Transaction fees can simply cover the payment processing fees or cover other costs too, eliminating the monthly charge.


ProviderPayment terminal costMonthly feePer Transaction fee
Zettle£29£01.75%
Square£19£01.75% for in-person, 1.4% + £0.25 for online transactions with UK cards
AirPOS Pay£0 (requires Windows, iPad or Android device)£01.4% + £0.14
Shopify£49£5-£69 (in-store only), £25-£344 (in-store and online)1.6-5% in person, 1.7-5% + £0.25 online
As spending habits continue to move away from cash, a POS system ensures that your business offers the payment options your customers like, and with a range of systems now available it means there's something for every type of business too.

FAQs

Do I need a POS system for my small business? 

If you’re looking to take card or mobile wallet payments from customers in person or online, then you will need a POS system for your small business. POS systems offer a range of payment options and processing facilities but check each provider to see what payment types it supports.


Why is a POS system better than a cash register?

A POS system is better than a cash register because it can accept a wider range of payment methods, can automate tasks like inventory updates, give you access to your sales data from anywhere, improve your customer experience and scale up with your business.


Can I use a POS with an e-commerce store?

Yes, you can use a POS with an e-commerce store. Some providers offer their own e-commerce solutions as part of their main product (or as an add-on), while others can be integrated with well-known e-commerce platforms to keep your offline and online sales in sync.


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References

1. UK Finance UK Payment Markets 2023