Picking the right POS system is a big decision because it can help you manage so many areas of your business. Once you’re settled on a system, it becomes an integral part of your operations.
Because of this, it’s not something you want to replace that often. That means you need to do your due diligence and pick the right one for your business. Part of that is understanding how much these systems cost. This piece will give you that information so you can pick a POS system that gives you the best balance of power and affordability.
Let’s start by looking at the two main kinds of POS systems. This post will help you understand the different components that make up each, and how those components affect the overall cost of the POS system. We’ll even show you how the costs might impact your overall business.
On-premise POS systems are a legacy holdover from the days of installed software. They’re typically categorized by a network of POS terminals or computers that are connected to a central server within your business. The software is installed on each of the terminals and the server. The server also stores all of the business’ data like inventory levels, sales performance, and more.
On-premise POS systems that are found in restaurants or bars typically use a proprietary touchscreen interface. Those used in retail stores typically look like a desktop computer with a monitor and keyboard that usually sits on top of a cash drawer. Then there are all the smaller pieces of hardware like barcode scanners, receipt printers, and a credit card reader that you’ll need to buy for each POS terminal.
A cloud POS is a system that doesn’t use an on-premise server. Instead, the POS software runs in the “cloud,” a remote data center. This is also where all of your business data is stored. Instead of using proprietary hardware or a desktop computer as a terminal, this type of POS software typically runs on a tablet, like an iPad or Android device, which can give cashiers and waitstaff mobility that they wouldn’t have otherwise.
Cloud POS systems still use those same smaller pieces of hardware, like a credit card reader and barcode scanner, but you’re going to need a couple of things you won’t find in an on-premise POS: a tablet and a stand.
- Tablet: An iPad or Android tablet are the most common ones used for POS software. When choosing a tablet and software, make sure the two are compatible with each other.
- Stand: A stand could just be something basic used to prop up or tablet, but getting a proper stand turns your software and hardware into a proper POS system.
Because of the portability of tablets, cloud-based systems can also be called mobile POS (mPOS) systems. These allow you to run transactions wherever you are in your store. Compare to an on-premise solution, it’s a much smaller setup which translates into lower costs on hardware as well software.
Additional benefits of a mPOS include features like included customer support, automatic software updates, and 24/7 access to your business’ data. You’d have to pay extra for these with an on-premise setup.
Many small businesses use cloud POS systems. Think of your local cafe or boutique. Have you ever noticed that your payment information and signature is taken on an iPad? That’s an iPad POS at work. While on-premise and cloud systems have some of the same components, many of the costs, as well as how you actually pay for the software and hardware will vary. Let’s look at some of the different costs that come with each system.
Costs of Software
Cloud POS software can be sold three different ways: upfront, per transaction, or a subscription.
The most common way to pay for cloud-based software is through a monthly subscription fee. While you don’t technically own the software in this scenario, you do have access to free automatic updates, included customer service, and many other benefits like managed PCI compliance. This monthly cost can be anything from $50- $130 per month per POS terminal, plus the cost of add-ons.
In some situations, you can get around paying a monthly fee. Instead, some companies will let you pay for a year or more up front. In doing so, you typically pay less than you would if you pay month-to-month. If you do this you can expect a year of service to start at $900 per POS terminal.
Pay Per Transaction
With this payment method, the software itself is free, meaning there’s no monthly or upfront fee to pay. However, that doesn’t mean it’s totally free. Instead, you pay a transaction fee each time you run a sale through their software. With this method, take the time to compare vendors to understand what their fees consist of and how that affects your profit per sale as well as the overall profitability of your business.
These fees can fluctuate depending on your provider. However, on average you can expect to pay your POS vendor between 0.5% to close to 3% per transaction. This can end up costing your business thousands of dollars per year depending on the volume of sales your business has.
On-premise POS software only has the option of being bought upfront and you have to pay for things like customer support separately. Together, the software and hardware for an on-premise system can cost up to $5,000 for a single terminal. And that doesn’t include the additional customer support you likely want to buy. That can cost you another several hundred dollars per month, depending on the support package you select. Keep in mind, with on-premise software, you’ll almost certainly need to rebuy the software every time there’s an update to it.
The Cost of POS Hardware
Whichever type of POS system you use, you will still need POS hardware. Let’s look at how hardware differs between the two types of systems, as well as how that will influence the overall cost of your POS purchase.
For an on-premise system, you might notice things getting pricey because of all the extra equipment involved, like keyboards and monitors for each POS terminal. Typically this hardware is proprietary, meaning that it’s made or licensed by the same company that makes the software. You need to either buy it from them directly, or in some cases, you may be able to purchase it from an approved reseller. You can’t simply purchase these items on Amazon. Not only is this inconvenient, but it’s also more expensive. This could add up to $3,000-$50,000 annually (including the cost of software) because of yearly maintenance fees.
With a cloud POS, the biggest cost is typically the tablet that serves as your register. Tablets can cost from $400 to as much $1,200. While technically almost anything can serve as a POS stand, we highly recommend buying a purpose-built tablet enclosure. Expect to pay between $100 – $200 for a tablet POS stand.
You can save additional money based on the fact that cloud POS systems used commodity hardware. For example, you can an buy an iPad from an endless number of vendors. Nothing is stopping you from waiting for a Black Friday deal at Best Buy and saving a few hundred dollars.
A sizeable chunk of the upfront cost of a POS system is from additional hardware like credit card readers and barcode scanners. These items are all essential to keeping your business running smoothly and simplifying the checkout process. Here are just some examples of things you should consider buying:
Make it easier on yourself and your staff. There’s no need to type in a barcode manually, or search for products by hand. Just use a barcode scanner to speed up that process. Don’t have barcodes? Don’t worry. Many POS systems can generate them for you automatically.
Wireless barcode scanners can be used all over your business (if you want to bust some lines). They can also be a useful tool when managing inventory. Barcode scanners can cost you as low as $30 for a simple scanning gun, but you could pay over $2,000 if you’re looking for the stationary scanning beds found in many department and grocery stores.
Credit Card Reader
Many people don’t carry cash with them on a regular basis, so a credit card reader, especially one that can accept mobile payments like Apple Pay and EMV payments (chip cards), is all but essential for meeting customer demand. There are affordable options that run from $50-$150, but there are also more expensive choices that offer additional functionality. For example, a reader that connects to your POS over Bluetooth is going to cost you more than a wired option. Some readers can cost you over $500.
Many businesses are going cashless, but consider your target audience and general location before making the decision to let go of cash completely. Cash drawers also aren’t very expensive and typically cost between $50-$200.
Give your customer the option of a physical receipt by adding a receipt printer to your setup. The cost of these printers can be as low as $20 and as high as about $350.
In a restaurant setting, you’ll need to be a printer for receipts and a printer for the kitchen. This additional printer sends orders to the kitchen straight from a restaurant POS in a clear format so there’s no need to write orders and deliver them by hand. Kitchen printers average about $150-$300.
Individually, these items may not cost much, but the price tag for everything can quickly add up, especially if your store has more than one POS terminal. Some POS companies make it simple to get started by selling starter kits with equipment based on your business type. Keep in mind that POS systems are customizable to your business needs, so you don’t necessarily need everything we just went over. Start with a budget in mind, and then pick and choose the hardware options that will fit within it. You can always upgrade your components as your business grows and your needs become more sophisticated.
Even with the flexibility to pick and choose a POS system that works for your budget, some merchants prefer to use cash registers. A cash register plus a credit card reader will give you what you need to run a business at a very basic level. However, the additional functionality of a POS more than makes up for the higher cost.
POS vs. A Cash Register
The debate on which one is better for business is as old as POS systems themselves, and cost is one of the main factors business owners use to decide between them.
While cash registers are less expensive, you still have to purchase additional hardware like a card reader separately. With that said, you can get a basic register for around $100. You can even buy them on Amazon.
On the other side of the coin, cash registers are very limited in their functions. All they can basically do is accept payments. A POS system makes up for the higher price by helping you manage many other aspects of your business. It can be the central hub for all your critical business tasks like inventory management, sales and analytics data, customer and staff management, and more.
SEE ALSO: The Great Debate: Cash Register vs POS
Which is Best for Your Business?
As the business owner, only you know enough about your business to make the right choice. Consider all the functionality that you and your staff need from a system. The answer to that, in large part, comes from what your customers value about your business, as well as how you prefer to operate.
With that said, here are some points to consider:
Mobile POS systems give you the freedom to manage your business wherever and the costs are much lower than more stationary systems. If you’re ever away from your business, a mPOS gives you the ability to access your store’s data without having to pay someone to export it for you making it more difficult to manage multiple locations.
Add-ons are POS features that don’t come standard with your POS software. This includes things like email marketing and ecommerce. Both of these options can drive business to your physical location and increase your profits without the costs of you having to keep your doors open 24/7. Add-ons for things like accounting software ensure that the data and numbers from your sales are always correct and that you’re always working with the most accurate and recent information. Add-ons increase the amount you pay for your POS software depending on how many you choose to have.
Cloud POS providers make sure your business data is encrypted so that no sensitive data can be used against you or your customers.
Ease of Use
On-premise POS systems can be clunky and confusing to use. But a modern cloud POS has a simple layout that you can customize to your liking. Everything will be a tap away.
Typically, staff have to clock into and out of their shifts using a timeclock or other method outside of your POS system. Cloud POS systems have staff management capabilities built in so that staff members clock clock in directly from the POS.
On-premise POS systems have much older and slower processes. It takes much longer to access business data and even complete sales. Cloud-based systems give you access to your store’s information even if your store’s Internet connection is down.
With a cloud POS system, you pay for your software, hardware, and run your business. An on-premise POS system can have you paying thousands of more dollars per year for software updates, having someone come and fix and replace hardware, customer support, and more.
The cost of a POS software or a cash register varies and it can be a big expense if not chosen correctly. It can be a tough choice, but arming yourself with knowledge is the best first step.