Melio Explains

Melio explains: POS–what and why?

Most if not all businesses that make sales have a point of sale (POS). But what does that actually mean and what’s the difference between a POS and a POS device? Spoiler alert–how you get paid can affect your entire financial health.

Melio explains: POS–what and why?

A little bit more about POS:

POS stands for “point of sale”. It’s the time and place where a customer pays you. A POS terminal is a device used to process transactions by retail customers.

Whether you realize it or not, you’ve definitely come in contact with POSs your whole life. A cash register is a type of POS system. Take Jose, for instance. He sells artisan coffee beans at a farmers market in Boise, Idaho. Every time he rings up a customer and opens up his cash register to deposit money, he is using a POS system.

However, cash registers have mostly been replaced by electronic POS terminals that are used to process payments. In a nutshell, a POS device or terminal refers to the hardware and software that allow your business to make sales.

The beauty of modern POS systems is that all you need is a POS app and an internet-enabled device such as a tablet or phone to ring in transactions. Imagine that Ella sells a line of skincare products in her Portland-based mom-and-pop shop. One day, a customer named Alex enters the store, puts a number of big ticket merchandise in her basket, and comes to the checkout counter to pay up. Ella scans the products with the camera on her smartphone and then her POS system calculates the price of each item, the total, and then the system updates the inventory count to show that the items were sold. Alex then swipes her credit card, and the POS transaction is finalized, resulting in an automatically printed receipt.

Common types of POS hardware

You’ve probably heard some POS-related terms thrown around here and there. As a business owner, it’s important to understand the ins and outs of daily operations. That’s why we’re going to break down common POS hardware terms:


A cash register enables you to calculate and process customer transactions. It typically has a drawer for storing cash, and it totals, displays, and records the amount of each sale.

Cash drawer:

Even if you go the contactless payment route, you likely still need a secure place to store your cash. POS software that’s connected to a cash drawer can reduce the risk of fraud by tracking every time the drawer is opened.

Connected device:

Connected devices include internet-enabled handheld devices that can be hooked up to POS software.

Barcode scanner:

A barcode scanner reads an item’s product details so you can properly ring it up. It’s a quick and effective way to check an item’s price, stock level, and other relevant information.

Credit card reader:

A card reader allows your customers to securely pay by credit card, whether that’s by way of contactless payment, a magnetic stripe, or a chip card.

Receipt printer:

A paper receipt shows customers what exactly they purchased, when, and how much they paid.

Common POS software features

Remember Ella who uses an electronic POS system? On a basic level, it allows her to locate items in stock and ring up sales as we saw above. However, it does more than just that. Let’s take a look at common POS software features.

Inventory management tools:

These enable you to keep track of all your products. They can connect with your sales data and notify you when you’re almost out of specific products.

Customer relationship management (CRM):

A CRM tool that’s connected to POS software allows you to view what your customers purchased and when they made their purchases. This data helps you personalize your marketing efforts and customer service.

Employee management:

Employee management software notifies you when your employees are working and how they’re doing. Your team can even use it to sign in and out of shifts.

POS reports:

POS reports synthesize data so you can have a simple overview of how much you’re selling and earning. These reports can help inform your business decisions.

Now that you have all the POS lingo down, you are better equipped to dive into research and decide which kind of system is best for you and your business!

*The purpose of this page is solely to provide information and should not be considered as financial advice
**Melio does not provide legal, tax or accounting advice; you should consult a professional advisor before making any financial decisions.