What is POS software?

POS software is used to process customer transactions, accept payments, and update inventory levels for a retail establishment. Depending on the vendor, businesses can choose between on-premise, cloud-based, or hybrid deployment models. Cloud solutions are generally less expensive on the front end, support greater mobility, and require less IT maintenance. However, some business may choose on-premise or hybrid solutions to ensure offline access in the event of an internet outage, or to secure deeper integrations with POS hardware (barcode scanners, card readers, cash drawers, etc.)


When it comes to features, the software market is highly diverse, with products ranging from best-of-breed payment processing apps to comprehensive product suites known as retail management systems (RMS). Although best-of-breed apps tend to excel at specific functions, a growing number of businesses are moving towards  integrated solutions that offer end-to-end functionality. The obvious benefit of an integrated system is that it links POS transactions to other back-end processes like inventory, accounting, and customer relationship management (CRM). According to a recent study by Boston Retail Partners, in the next four years there will be a six-fold increase in the number of retailers using unified commerce platforms.

Transaction and payment processing

Clerks and sales associates can enter items, calculate total purchase cost, process multiple payment sources (card, check, cash, etc.), and print customer receipts. They can also use the system to issue refunds for returned merchandise or void transactions performed in error.

Transaction and payment processing

While most POS systems don’t include full-featured CRM software, they usually have some ability to store basic customer data, such as name, contact information, and purchase history. This data can be used to personalize the shopping experience, build marketing campaigns, and access specific transaction details without a paper receipt.

Transaction and payment processing

Better inventory management is one of the biggest opportunities for retail establishments to improve their bottom line. American retailers have lost an estimated $224 billion by keeping too much inventory in stock, and $45 billion by not having enough. While standalone inventory management software exists, most POS software can update inventory levels in real-time, at the moment the transaction occurs

Hardware integration

Although many retailers are now using consumer devices to process transactions, it’s still important that solutions support proprietary hardware used to scan items, print receipts, and accept payments. For retail establishments with smaller inventories or mobile sales operations, this can be as basic as a card reader + receipt printer + tablet setup. Larger stores may require more specialized hardware, such as barcode scanners, scales, tag deactivators, and inventory PDAs.

In addition to these larger functional areas, a retail POS solution may offer some or all of the following features:

  • Purchase ordering
  • Warehouse and supply chain management
  • E-commerce
  • Marketing automation
  • Store budgeting
  • Performance management/KPI tracking
  • Native mobile application(s)
  • Rewards/loyalty program(s)