What is Point of Sale Terminal: How Does It Work


Key Takeaway:

  • A Point-of-Sale Terminal is a computerized system that lets businesses handle sales and process payments from customers. It offers a range of features, such as inventory management, sales tracking, and reporting, making it an essential tool for all modern businesses.
  • Components of a Point-of-Sale Terminal may include a monitor, a keyboard, a cash drawer, a barcode scanner, a printer, and a card reader. These devices work together to enable transaction processing and sales recording.
  • When processing a transaction, the Point-of-Sale Terminal calculates the total bill, offers payment options to the customer, and records the details of the sale. It also updates inventory levels and generates reports that help businesses make informed decisions.

Have you ever experienced any complications while making a purchase at the counter? This article will show you how a Point-of-Sale terminal helps make the checkout process simpler and faster for both businesses and customers. You'll learn about the features and key benefits of using this technology.

Components of a Point-of-Sale Terminal

The different segments of a Point-of-Sale (POS) Terminal are integral for businesses to collect transactions from their clients. A POS Terminal is a combination of hardware and software tools that allows smooth and safe payment transactions.

The following are the four main components of a POS Terminal:

  • Display Screen: This is a touch screen or a monitor that lists goods for purchase and their prices to the customers (also may display ads).
  • Cash Register: A cash drawer is attached to this terminal, where the encryption and decryption of credit or debit card data happen.
  • Electronic Payment Terminal: This hardware interprets the cardholder's details linked with their bank account and checks the transaction authorization request.
  • POS Software: This software facilitates the transaction's processing from start to finish, from accepting payment to printing receipts.

Apart from these primary components, some POS Terminals may have additional features like cameras and scanners that make it possible to track inventory, evaluate costs, and execute additional tasks relating to the company's sales.

Businesses that utilize POS Terminals develop a competitive advantage over those that do not, with transaction security at the forefront. According to Statista, the POS terminals market's global size was valued at $74.6 billion in 2020 and should grow to $108.7 billion by 2025.

How a Point-of-Sale Terminal Works

Know the basics of processing a transaction and recording sales data? You need it to understand how a Point-of-Sale (POS) terminal works!

To make a payment quickly and efficiently, it must be able to accept different payment options and calculate the total cost correctly.

Let's explore the details of processing a transaction and recording sales data. This way, you gain a better understanding of how a POS terminal functions.

Processing a Transaction

Processing a Sale Transaction - Point-of-Sale

A point-of-sale terminal is responsible for processing a sale transaction efficiently. To process the sale successfully, you need to follow a few simple steps that guarantee a seamless checkout experience for your customers.

  1. Enter the Product or Service: The first step in processing a sale transaction involves entering the product or service purchased by the customer into the point-of-sale terminal.
  2. Confirm Pricing Details: After entering the product or service information, confirm all pricing details displayed on the screen to avoid errors and discrepancies.
  3. Select Payment Method: Once you have confirmed all pricing details, select the payment method preferred by your customer, whether it be credit card, debit card, or cash.
  4. Process Payment: Next, process the payment through your selected method. This step usually involves swiping or inserting credit cards into a card reader and verifying payment authorization with the card issuer; however, cash payments may only require inputting tendered amounts.
  5. Receipt Issuance: Finally, after processing the payment successfully, issue an accurate receipt reflecting comprehensive details of your transaction and any taxes applied.

Many sophisticated point-of-sale terminals offer additional features such as loyalty rewards programs and inventory management options to cater to efficient store management protocols.

Interestingly enough, American retailer Nordstrom's story serves as an excellent example of point-of-sale efficiency at peak levels. During their anniversary sales event in 2017, they processed more transactions than ever before when they implemented new mobile tills into their strategy - serving on average 15% more customers per hour!

Always remember to pay with cash if you don't want your questionable purchases recorded by the point-of-sale terminal.

Recording Sales Data

Accumulating Transaction Details

A point-of-sale terminal records sales data as it processes payment transactions. The recorded data can include product, price, tax rates, discounts, payment method, transaction ID number, date, and time.

Below is a table that illuminates how sales data are expedited:

Transaction Information Transaction Details Product Information Product Name Product ID Pricing Details Unit Price Discount Offered Tax Rates Information Tax Rate Locality-wise