What is a POS System?

A POS system, or point of sale, is a combination of hardware and software built to centralize business operations. It manages the transactions for your business, including credit card processing, and the post-transaction operations that lead to customer fulfillment, whether in a retail or restaurant setting.


POS systems are replacing traditional cash registers because of added functionality.

The best POS systems help businesses increase revenue, tailoring their experiences to meet the customers' needs and improving operational efficiency. The impact on the business can be drastic. In our research, we have seen some companies have experienced:

  • 20% increase in revenue by giving companies access to online ordering and gift card programs, and enabling faster throughput of customers
  • 30% reduction in labor hours by tracking labor costs
  • 4% savings in annual sales by analyzing inventory and sales trends to reduce theft
  • 10x more loyal customers by providing loyalty offerings to entice customers to return

Learn more about how the POS system works by scrolling below. 

Evaluating POS systems? Download the instant guide to help decide which restaurant POS system is right for you. 

Learn How Toast Can Help Your Restaurant

1. The History of POS Systems

While there are many point of sale options available today, that wasn’t always the case. In fact, most industries were using cash registers until 1992, when the first POS software for Microsoft Windows was created. In the early 2000s, however, developers created cloud POS systems for Android and Apple devices. Since then, the modern POS has continued to evolve, with options for online ordering, gift cards, loyalty programs, tableside ordering, and more.

At first point of sale systems only included the hardware and hospitality point of sale software that manages a sales transaction, including credit card processing, receipt printing, and more. However, more modern POS systems can streamline your internal operations, connect all of the various personnel involved in making your restaurant run smoothly, and automatically track sales, labor, and inventory metrics. This helps increase revenue, profit, and customer satisfaction while decreasing employee turnover, order mistakes, wait time, and your stress level.

The trend towards more modern POS systems is stark. According to the Restaurant Technology Report, more than half of restaurateurs require the type of "advanced functionality" and "ease of use" that modern POS systems offer in order to upgrade. The need to have these features to compete in the day-to-day results in a staggering statistic: 73% of restaurants are planning to upgrade their POS system within the year. (back to top)

(back to top)

2. POS for Restaurants

Point of sale systems have revolutionized the restaurant industry, particularly in full-service and fast food restaurants. With touchscreen POS systems or touch screen cash registers, servers can send orders to kitchen display systems immediately, improving throughput and efficiency of orders.

Another innovation in POS systems for restaurants is the mobile POS. Many full-service and high-volume restaurants use wireless, handheld tablets to take orders at the table. These orders go directly from the tablet to the appropriate prep stations. Plus, checks can easily be split across guests, who can pay, sign, and tip at the table from these devices right at the table.  (back to top)

3. POS Hardware

In most cases, there are three options for POS hardware: PC computers, Apple iPads, or Android tablets. PC computers are plugged in to a server in your back office, so all unencrypted credit card data is stored on the computer. Apple iPads are cloud-based, but not cheap, and only come in a few sizes. However, Android POS tablets are customizable in terms of sizes, durable for messy kitchens, and flexible with many peripheral connections for ethernet, HDMI, and USB.

Besides the general terminal hardware, most POS systems integrate with other hardware options such as kitchen display systems, receipt printers, scales, cash drawers, pole displays, scanners. (back to top)

4. POS Software

POS software used to have to be installed on a PC computer. Online POS software, however, is a new trend among point of sale systems. This software can be accessed online in real-time from any internet-connected device. Plus, it can integrate with many other restaurant software solutions.

POS software allows for the collection of data about credit card transactions, customers, sales, taxes, inventory and labor. Many modern POS systems implement a software-as-a-service (SaaS) model, where customers pay a monthly subscription to access and use the software. (back to top)

5. POS Analytics

A POS system is not only a way to take payments; it’s also a way to view valuable analytics about your establishment. Many POS systems have back-end functionality that allows you to view reports on sales, labor, and more. This allows you to make data-driven decisions about which marketing campaigns to invest in, which employees to promote, and which menu items to retire.

Even more advanced systems give you a POS dashboard for your reporting that you can customize and prioritize depending on the metrics most important to you. These analytics can be viewed online in real-time by anyone with the right permissions. (back to top)

6. POS Support and Security

Because POS systems collect data on customer credit cards, that data should be well protected. Many POS systems offer end-to-end encryption of data, meaning it remains encrypted when traveling from tablets to processors. If data is ever stored on local servers, there is a chance it can be hacked; cloud POS systems combat this by transmitting all information collected directly to cloud-based servers over a secure HTTPS channel.

Quality POS support is almost as important as POS security. A POS system with 24/7 emergency support is essential for establishments that are open late. Plus, if the POS system is cloud-based, support experts can access your system via the internet and solve problems on the spot. On the other hand, If you partner with a vendor who offers unreliable support, you could find that the POS system requires a significant and frustrating time commitment to set up and to maintain. (back to top)

7. Comparing POS Systems

Purchasing a POS system involves time-consuming research and many demos with various vendors. Many people end up comparing POS systems on price alone, but there are many other factors to consider when buying a POS system.

When analyzing POS systems, it’s important to focus on how the various costs will translate into value. First, determine your “must-haves” and your “nice-to-haves” when it comes to a POS system. Then, brainstorm a list of questions to ask each sales rep By asking the right questions during each POS demo, you can effectively compare POS systems on features, support, and more.  (back to top)

8. Buying a POS System

When buying a POS system, it’s easy to get locked into long-term contracts or pay hidden services fees. Many POS vendors are not concerned with whether the system will actually be the best fit for their customer and will go to great lengths to convince buyers to sign on the dotted line. Therefore, even restaurant owners who took the time to do their research can find themselves in an unfavorable partnership with their POS vendor.

The most common complaint from business owners regarding their POS companies is a lack of transparency. When buying a POS system, it’s important to gauge your salespersons’ trustworthiness. POS vendors should start by trying to get a sense of your current situation, your most pressing needs, and what you want to gain specifically from your next POS solution, not by selling you on cost right away. (back to top)