Point of Sale Software Explained: ABCs of point of sale software
Point of sale software represents a significant retail management system investment for retailers. Accordingly, as you begin considering a point of sale software system, it's important to understand how point of sale tools work.
how point of sale software systems work in a nutshell
Point of sale software automates the process of ordering, receiving, stocking and selling inventory. The unique feature of point of sale software (as compared to general accounting software) is that point of sale software collects detailed information about every step in this retailing process. To better understand how a point of sale software system expedites the process, you can consider how this process works both without a point of sale software system and then with a point of sale software system...
Working without a point of sale software system
Without a point of sale software system, the retailing management process works like this: The retailer orders some item--probably after a bit of head-scratching and catalog browsing. A few days or weeks later, the inventory arrives as the retailer's location. The order sits there for a few days (or longer) until the retail manager can open the boxes, price the items, and then move the items out onto the store shelves or floor. After this point, what happens to the ordered items is almost a mystery.
Presumably, at some future point, the items will be sold. But the retailer won't really know when or how. The cash registers will only track the amount of sales and when sales occur. The point of sale devices won't be smart enough to track the actual items sold.
At the end of the year, the retailer will take a physical inventory--a big task since the retail manager and his or her staff will be counting every item and (theoretically) looking every inventory item's price. At this point, and only at this point, the retail management will have a big picture idea of whether the store as a whole made money or not and what inventory is held.
The description in the preceding paragraphs is not a criticism of the "usual retail management system." It works reasonably well--especially for small independent retailers. However, with a point of sale software, the inventory management process works much differently.
Working with a point of sale software system
Work a point of sale software system, the retail management process works more smoothly and with much greater detail about what's happening. The process probably works like this: First, the retailer orders some item--probably after reviewing a point-of-sale-system report tells him he's low on stock of some hot-selling item.
A few days or weeks later, the inventory arrives as the retailer's location. However, the order sits there for only a few hours and is them moved out onto the floor. Why is that? Stocking and pricing the inventory is easy with point of sale software. Bar code scanning makes it lightning quick to correctly tag items with price stickers.
After this point, what happens to the ordered items is closely tracked. At some future point, of course, the items will be sold. And the point of sale register will at that time update the retail management system's records for the sale. The retailer's sales records will also be updated.
At the end of the year, the retailer will probably still take a physical inventory... but the retailer may also decide to break the physical inventory into manageable chunks using a technique called cycle counts. This will be possible becauase at every point during the year, the retailer will have a detailed picture of what items the store holds in inventory, what items are selling, and what items need to be stocked.
Summing up a point of sale software system
In short, a point of sale software system allows retailers to know exactly what's selling--and what's not. A point of sale software system also tells retailers what inventory items they are holding--as well as inventory items they should be holding and should not be holding.
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