Module 01 of 09
Point of sale systems
Your POS is the operational core of your business — every sale, every refund, every end-of-day report flows through it. Choosing the right one early saves you from a painful migration later. Choosing the wrong one costs you money in fees, time in workarounds, and data you can never get back.
What a POS actually does
Most people think of a POS as a cash register. It's more than that. A modern POS system processes payments, tracks inventory, records every transaction, manages employee shifts, generates sales reports, and connects to your accounting software. It's the single system that touches every part of your daily operation.
For a physical business, your POS choice has downstream effects on almost everything else: which payment processor you use, how you track inventory, how you do your bookkeeping at the end of the month, and how easy it is to train new staff.
THE CORE FUNCTIONS TO EVALUATE
Payment processing · Inventory tracking · Sales reporting · Employee management · Customer records · Receipt printing/emailing · Integration with accounting software
Hardware vs. software — what you’re actually buying
Modern POS systems separate into two parts: the software (the app that runs the system) and the hardware (the device it runs on, plus any card readers, receipt printers, and cash drawers).
Most POS software now runs on iPad or Android tablets. This is generally better than old proprietary terminals — the hardware is cheaper, more familiar, and replaceable without switching systems. Some businesses run the software on a laptop with a USB card reader. A few still use dedicated POS terminals, but these are becoming less common for small businesses.
WATCH OUT
Some POS providers lock you into their proprietary hardware. If you switch systems later, your hardware becomes useless. Prefer systems that run on standard iPads or Android tablets you already own or can buy anywhere.
Comparing the main options
These are the systems most commonly used by small physical businesses. The right choice depends on your business type, transaction volume, and whether you need inventory management built in.
| System | Best for | Monthly cost | Processing rate |
|---|---|---|---|
| Square | Retail, food, market vendors — simple setup, free plan available | $0–$149 | 2.6% + 15¢ |
| Shopify POS | Businesses selling online and in-person — unified inventory across channels | $25–$89+ | 2.4–2.6% + 10¢ |
| Lightspeed | Retail with complex inventory — variants, purchase orders, multi-location | $89–$289 | 1.5–2.6% + 10¢ |
| Toast | Restaurants and food service — purpose-built for F&B operations | $0–$69+ | 2.49–3.09% + 15¢ |
| Clover | Retail and service businesses — flexible app marketplace, multiple hardware options | $0–$85+ | 2.3–2.6% + 10¢ |
Pricing verified June 2026. Monthly cost reflects software plan only; hardware is additional. Processing rates shown are for in-person card-present transactions on entry-level plans — paid tiers typically offer lower rates. Square's free plan now charges 2.6% + 15¢ (updated from the previous 10¢ flat fee in late 2025). Lightspeed's low rate of 1.5% applies when using Lightspeed Payments; third-party processors incur a monthly surcharge. Toast's $0 Starter Kit carries higher processing (3.09% + 15¢); the $69/month plan drops to 2.49% + 15¢. Clover pricing varies significantly by reseller — rates above reflect direct-from-Clover published rates. Verify current pricing at each provider's website before committing.
FOR MARKET VENDORS
If you primarily sell at farmers markets or pop-ups, Square's free tier with a mobile card reader is usually the right starting point. No monthly fee, works on any phone, and the reporting is solid enough for a market-based operation.
In this Module
What a POS does
Hardware vs. software
Comparing systems
Processing fees
End-of-day close
Real-world examples
Related Modules
Accepting payments
Inventory management
Opening & closing
Technology & tools
Understanding processing fees
Every card transaction costs you money. The typical structure is a percentage of the sale plus a flat per-transaction fee. On a $50 sale at 2.6% + 10¢, you pay $1.40 — about 2.8% of the total. This matters more than most new business owners expect.
On $10,000 in monthly card sales, 2.6% + 10¢ averages to roughly $260–$280 in fees. Some systems offer lower rates if you pay a higher monthly subscription fee — that math only works if your volume is high enough.
THE INTERCHANGE-PLUS TRAP
Some processors advertise "interchange plus" pricing as transparent and cheap. It can be — but the markup varies and the statements are hard to read. Most small businesses do fine with flat-rate pricing. Interchange-plus is worth investigating only when monthly card volume exceeds $20,000–$30,000.
End-of-day reporting and what to check
Your POS generates an end-of-day report after every shift. Getting in the habit of reviewing it takes five minutes and catches problems before they compound. At minimum, check total sales, number of transactions, any voids or refunds, and the difference between expected cash in the drawer and actual cash.
THE DAILY CLOSE CHECKLIST
1. Run the Z report (end-of-day close)
2. Count the cash drawer and compare to POS expected amount
3. Note any discrepancies over $5
4. Check voids and refunds — were they authorized?
5. Export or confirm the day's data synced to your accounting software
Real-world examples
Rachel — gift and home goods shop
Opened 2022, 1 location
Rachel started with Square because setup was fast and she could use her existing iPad. Two years in, she switched to Lightspeed because she needed better inventory management — tracking hundreds of SKUs with variants (color, size) was too manual in Square. The migration took a weekend and cost her about $200 in consultant time to move her product catalog. "I wish I'd thought harder about inventory before I started. Square is great, but I outgrew it faster than I expected."
Diego — taco and elotes cart
Farmers markets and events, 2021–present
Diego runs entirely on Square with a $49 card reader and his phone. He doesn't need inventory tracking (he knows his stock by looking at it), and the free tier covers all his reporting. His biggest operational discovery: always bring a backup charger and a paper receipt book. He's saved two market days with the paper backup when his phone died.
Priya — yoga and wellness studio
Studio with class bookings and retail, 2020–present
Priya chose Mindbody (a booking-first system with POS built in) over Square because class scheduling was her primary need. The POS is less polished, but having one system for bookings and sales was worth the tradeoff. "For any business where scheduling is central, I'd look at booking platforms with POS rather than POS platforms with booking tacked on."