What is a POS System for Inventory Management?

It may be time to retire your cash register for a POS system. Credit: AndyL / Getty Images

Question: What are Point of Sale (POS) Systems for Inventory Management?

Answer:

Point of sales systems are checkout locations in business operations where transactions occur. The checkout location is a point of sale or POS terminal, which is just a computer used as a cash register. Point of sales terminals and systems make perpetual inventory control systems possible.

What are the Advantages of a Point of Sale System?

A point of sale inventory management system is a step up from the use of a cash register.

Small, start-up businesses who sell services and not products may be able to survive with just a cash register and a simple accounting system. If your business is product-based, chances are you will eventually have to switch to at least a basic point of sale inventory system. With a point of sale system, you don't have to worry how much inventory you have on hand. The point of sale system keeps track of that and you have the information at a glance.

A point of sale inventory management system allows a business owner to have more than one business location and adequately keep track of inventory at each without being present. No more worries about employee theft or pricing inconsistency between one location and another. The boss can be away and not worry about employee theft. Employee efficiency can be maintained. Point of sale systems take care of those problems that result when management isn't present.

Another issue with more than one business location and inventory management is that point of sale systems help keep prices of inventory stable from one location to the next.

What Other Services do POS Systems Perform

Point of sale systems make marking down prices and recording the markdowns easy. Instead of going through a mountain of receipts at the end of the day, the point of sale system calculates the markdowns automatically as sales occur.

Like markdowns, if you want to promote your products, point of sales systems make it easy. Promotions, discounts, and coupons can be tracked and the effect of these promotions recorded daily. Tracking the effect of promotions of products is almost impossible without point of sales inventory management systems.

What Types of Businesses use POS Systems?

Examples include retail businesses which spring to mind as a primary user of point of sale inventory management as tracking small units of inventory are particularly important in retail. Some POS systems feed right into a retailers accounting program for even more efficient use of the data. Not only do they feed in inventory numbers, but also sales, accounts receivable, and returns and exchanges, along with many other variables.

The restaurant business, especially the fast-food industry, uses the point of sale system very effectively. These POS systems can handle customer owners, processing payments, as well as drive-through windows. Wireless POS is used extensively in restaurants to call customers to tables, for example.

The hotel and hospitality industry makes use of point of sale systems.

What Type of Hardware is Necessary for a Point of Sales Inventory Control System

Depending on the type of business, the type of hardware the business needs varies.

The POS terminal includes a computer tower and monitor of some configuration, a display for the customer to read, a card reader if the business takes debit and/or credit cards, some type of keyboard system, scanner, receipt printer, and cash drawer. There may be other elements added to the system based on the type of company and the complexity of the point of sale system the company has set up.

Perhaps the biggest benefit of the point of sale inventory management system is that employees and management can focus more on the customer service aspect of the business and less on counting receipts and inventory. Point of sales system also allow management to gather customer purchase data in order to develop forecast models and create detailed reports.