To the Point

Point-of-sale systems are becoming more common and cheaper than ever. Does that mean it's necessary for every business owner to get one?

“All night,” Greg Martin says, shaking his head as he looked out across his many aisles of inventory. “That’s how long it look to write the purchase orders in those days.” Martin, along with his wife, Betty, is the owner of Jackson’s Fish and Pet Supplies, a pet store in Bradley, Illinois. Twenty-five years ago, he was conducting most of his business with pen and paper and a simple electronic cash register. Inventory had to be checked manually virtually every evening. He had no real knowledge of a certain customer’s buying history and his bookkeeping all had to be done by hand. Watching him recall those days is an experience similar to watching someone wake up from a nightmare. “It was horrible,” he says.

Today, all of the transactions that occur at Jackson’s involve the company’s elaborate point-of-sale (POS) system, and he especially likes that his POS system generates his purchase orders. When only one of a certain product is left in the store’s inventory, the computer automatically adds a new shipment to his purchase order. In addition, Martin can look up the item’s purchase history to decide if it’s worth reordering or not.
“I can’t see how even a really small business could work without a point-of-sale system, especially if they have any kind of inventory at all,” Martin says. “You just scan it, hit a button, and that’s what you owe me. The system removes the sold item out of my inventory, it’ll tell me the last time I sold it, it’ll tell me how many times I’ve sold it this year, and it does my reports for me.”

More Than A Cash Register

To oversimplify, POS systems are essentially glorified cash registers. Like their simpler counterparts, they include a receipt printer, a cash drawer and the ability to calculate the totals of orders. That’s where the comparison ends. Even moderately low-end POS systems possess the ability to scan barcodes, handle credit cards, and generate many different reports. A company’s overall efficiency and productivity is thereby increased, allowing business owners to spend more time on practices that will benefit their customers as opposed to spending an inordinate amount of time tending to the bookkeeping.

One of the main benefits of a POS system is better control over your inventory. In the past, knowing if an item wasn’t properly shelved was a hassle at Jackson’s. “Nowadays I trust the computer to say that a certain item’s out there, and sure enough, it is out there, but it’s still out of place,” he says. “Before you had to go around and scratch your head and say, ‘OK, how many of these do I have?’ You had no way of tracking.” Tracking an item is especially simple at Jackson’s today since almost everything in the store has a UPC code. “Even my fish all have UPC codes on their tanks,” Martin laughs, “so I can tell you exactly what kind of fish we sold yesterday at three o’clock in the afternoon.” UPC codes not only add the benefit of keeping an accurate inventory, but they also eliminate employee theft in certain companies since the employees know that the inventory is being closely monitored.

In addition, POS systems help you keep track of how much a certain customer has purchased and what his or her buying habits are. His POS system also allows for the use of plastic loyalty cards, which, when used over time, allow customers to qualify for certain specials. Martin points out that these are very similar to the cards used by larger chains such as Petco and PetSmart, allowing him to keep a competitive edge on those companies, since each have locations in his area. It also helps him to identify his best customers, who get an automatic five percent discount. Best of all, there’s no limit to how far back his system’s records can go. “This can even show purchases that a particular person made back in the ‘90s,” he says.

The Problem Of Buying

Recommending any one type of POS system is virtually impossible since each system is usually built to cater to a individual business’s exact needs. What’s more, many POS distributors and service companies are local rather than national, making it difficult to advocate any one service. Making a wrong decision could result in the loss of thousands of dollars, so it’s best to find a dealership and service that can work with you to provide you with the best product and service. Many POS dealerships insist on selling a POS system with both the hardware and the software installed, but Martin advises against this. “I told my company that I just wanted the software. Why should they sell me a computer that my computer guy knows nothing about? He knows what to do if it breaks down because he built it. My company did recommend the keyboard and the scanner, though, because there are certain kinds of those that work best with their software.”

Cost is another factor that may frighten off many business owners, but this isn’t as much of an issue as it was 10 years ago. The most basic POS system, usually purchased off the shelf, can cost around $1,500, with the added headache of having to install and program the system yourself. Support, in fact, should be your main focus when considering a POS vendor. Research several companies to see what other business owners think about the efficiency of their provider in the event that their system goes down. Get a demonstration of several systems and verify the cost of installation. A complete system, including support, usually costs between $2,000-$5,000. Keep in mind, however, that almost all POS systems pay for themselves in time through increased productivity and efficiency.

Martin also insists that all small business owners be sure to buy a backup drive along with their POS system. “It does the backup at night on its own,” he says. “When I lost my hard drive some time back, all I had to do was pull out the last disk that was in there and download that back in and it was up and running again.”

Some businesses, however, get along fine with an electronic cash register. One such business is Gem Comics in Elmhurst, Illinois, which uses an aging Samsung 4915 electronic cash register coupled with a credit card terminal to make the vast majority of transactions. Gloria Berman, the store’s owner, sees no reason to upgrade. “I’ve been doing this for 25 years without one,” Berman says, who cites both the cost of a POS system and her business volume as reasons why she doesn’t need one. “It’s never like a grocery store here where I have a line of people waiting to check out. It’s rare that I have a line so it doesn’t matter how slow I go.”

Berman is quick, however, to praise the benefits of having an electronic cash register. One event in particular reminded her of how much she relied on the system. “The battery wore out on the system last July, and it broke down right before my 25th anniversary sale, so on the first day of my sale, I was working with a calculator and a pad of paper,” Berman says. “I want you to know that when I got to the end of the day and I checked out, I was worn out. An electronic cash register’s a big time saver, especially for the end of the day when you just want to say, ‘Give me my end of the day reconciliation.’”

“I’d be lost without it,” Martin says. “I really would.”

Berman also believes that POS systems remove the opportunity for people to learn how to handle their own finances. “I use mostly high school students, so they’re not yet ruined by scanning and not using their brains,” Berman says, “and I teach them how to count change back.” Also, Berman adds with a smile, “I teach them how to think.”

As POS systems go down in price and become easier to use, however, it seems a given that they may be in every type of small business in as few as 20 years. Jackson’s Fish and Pet Supplies, for instance, isn’t gigantic, but it is large enough to be representative of a typical successful small pet store and the success Martin has experienced may serve as a useful lesson for similar retail businesses. With the POS system, the employees at Jackson’s can spend more time assisting the needs of their customers since the necessity of spending a long time at the counter has been eliminated. As a result, Jackson’s has a reputation in the Bradley area of being a first-class store that can actively compete with the larger chains.

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