Retail transactions are tallied and funds are collected when the customer stands at a counter in a brick and mortar store. These activities are called point-of-sale, or POS, transactions, and retailers’ needs have changed dramatically over the years. Old manual cash registers have been replaced by smart terminals that are able to provide substantial amounts of data. Opinions vary about the size of the financial investment that must be made to support retail operations of various sizes. The point of sale system cost does not always tie directly to the sales revenue of the enterprise.

Define Needs

Point-of-sale equipment is purchased early in the planning stages of any business. Some business owners will choose a very basic cash register and then struggle to ascertain the actual sales and inventory statistics required by the accountant. Certain decisions can be made concerning the actual cost of the POS equipment by determining what information is required to manage the retail business.

• Price controls – Actual costs of goods can fluctuate dramatically over the course of a year, and the POS system that can be changed easily will save time and track the timing of each price change. Inaccurate prices can be very costly to a business of any size.
• Inventory tracking – Tight controls over the inventory on the sales floor is essential to reducing costs. POS registers that will categorize the types of goods that are sold throughout the day will assist with future ordering efforts and physical inventory management. A simple cash register will not provide this valuable function.
• Reporting – Software-driven POS terminals can be queried for many valuable reports that will reveal the salesperson, types of sales and sales margin of the business conducted at any point during the business day. These reports can be used to prioritize the inventory orders and determine the efficiency of the staff.

Invest Appropriately

Every component in the POS system has a predictable cost that will rise depending on the number of functions included. Overall system cost will range from $2,500 to $6,000 for each workstation when the system is programmed, customized and installed.

• POS terminal – Basic cash registers will cost $200-$500, but POS terminals can cost $3,000 to $4,000 each. Each piece of hardware will provide various levels of function and allow different features to be added for additional functionality.
• Price versus cost – The initial price of POS system components should not be the final deciding factor. Cutting corners in the purchase price may be expensive if the POS system does not provide important information for other business functions. Point of sale system cost must be weighed against the advantages each component would provide.
• Clerk training – Simple cash registers are inexpensive, but they require additional training for each person who conducts sales with customers. Very intelligent POS terminals have helpful prompts that enable the clerk to follow instructions and achieve positive results. Equipment training is essential for everyone who will work with the POS terminal.
• Existing back-office software – Many POS systems will communicate with the back office software that is currently in use. Care must be exercised to ensure that the two systems will communicate since replacing an entire software system can be costly in time and resources.
• POS software – When each POS terminal runs on licensed software, a single-user license will cost somewhere between $1,200 and $2,500. Multi-user licenses are much more economical and should be considered if the business is on a growth trend.
• Return on investment - While thousands of dollars for each terminal may seem exorbitant, the effort saved by an intelligent POS terminal can save time and money for the back office personnel. When the inventory reports can be tied to the cost of goods sold, the accounting department is able determine how profitable each hour of the day has been.

Choose the Best Features

Based on the defined needs mentioned above, the price of POS system components can be justified if they support other business functions. Each choice can increase the initial point of sales system cost, but save money and effort over the long term. Some components can be added later, but the chosen POS system must be expandable to support this option.

• Networked – Large retailers use POS sales terminals that are networked together. This function is important for keeping every terminal synchronized and up-to-date. If one terminal is purchased, but expansion is anticipated, a network terminal would be a prudent choice.
• Remote locations – POS terminals that can communicate over the internet will support remote retail outlets that must be updated from a central location. Whether the remote location exists at the outset or not, if one is planned, the capability should be purchased from the outset.
• Reporting – Itemized sales reports and profit margin reports can be useful when business decisions require POS data. This function is included in the cost of POS terminal software.
• Scanner – Stationary and hand-held price scanners improve the speed at which a sales clerk can complete a transaction. Product information is recorded for reordering and sales reporting. Scanners are usually included in the price of the POS terminal since that is the primary input.
• Cash drawer – Secure cash drawers can be attached to the POS terminal or installed in a sturdy cabinet that serves as the work surface for the sales clerk. This component is included in the cost of the POS terminal, and the decision maker has the option to determine when the drawer can be opened and when supervisor approval is required.
• Printer – Receipt printers vary in size and capability, and the POS terminal software will determine what level of detail can be printed on the receipt. Specialty paper can add to the cost of system maintenance and must be considered in the overall cost assessment.

Final Evaluation

Initial setup costs can be daunting for new business owners who wish to establish a profitable retail business. One of the ways to cut costs is to select a similar business that might be upgrading their equipment and find out if their older equipment is for sale. Used equipment has useful life that can assist in the effort to support customers and make subsequent decisions for the permanent POS system.

If a new system is selected, many POS system providers recommend that an extended warranty is purchased to cover the cost of replacing crucial components if one fails. Rapid response is essential to supporting the sales efforts of the retail store. When the system encounters an interruption, the cost of repairs might be devastating.