POS System Meaning: The Vocabulary You Need To Know

Are you in the market for a point of sale (POS) or simply confused by what the term POS means? If you find yourself perplexed by the payment industry’s technical jargon, then continue reading.
If this sounds like you, the great news is you are not alone. The even better news is that we are going to clean up all the complexities of what a point of sale actually is, describe the software which powers it, and discuss examples of the hardware that works in conjunction with the software to give you a complete solution.

If you don’t live and breathe POS systems like we do at ConnectPOS, it’s easy to become confused by business terms and all of the moving parts that produce a complete POS solution. Whether you are in the market for a restaurant POS or a retail solution, there’s industry lingo you’ll want to be familiar with. Understanding this lingo will allow you to have educated and productive conversations with POS vendors, so that you can quickly zero in on the system that’s ideal for you. We know that as a small business owner, you are time-strapped; that is why we’ve done the heavy lifting for you. We’ve defined many of the conventional terms you’ll come across during your hunt for the best point of sale system.

Let’s get started.

B.S. is for Barcode Scanners (Not Bull Sh*t)

Barcode scanners are an excellent way for cashiers to get customers through the checkout process quickly. They also have a bonus use that will save a lot of time in regards to inventory management. As you’re checking in items from an inventory delivery, you can quickly scan the merchandise and simply adjust the item quantity from the POS software.

Sometimes known as a barcode reader, a barcode scanner is an electronic input device used to capture and read the information contained in a recorder or QR code. It then takes the data and transmits it to the POS software, so the corresponding item from the inventory database is added to the purchase. The scanner is connected to the POS either using a USB or Bluetooth connection.
A one-dimensional barcode scanner is used to scan linear Universal Product Codes (UPC) on consumer goods in a retail environment.

2D Barcode Scanner

A two-dimensional barcode scanner is used to scan more intricate codes such as Data Matrix, QR Code, and PDF417. The most common usage in a storefront is scanning 2D barcodes on a driver license for age verification.

Since more and more customers are paying with plastic for everyday purchases, you’ll need a piece of equipment to process debit and credit card transactions.

Credit Card Terminal

A credit card terminal is a generic catchall term used to describe any payment approval device used to process debit or credit card transactions. It may be anything from a mobile device to a conventional Ethernet device found in most brick-and-mortar stores.

EMV Card Reader

An EMV card reader is a device that can process chip-based debit and credit card transactions. Most EMV readers can process magstripe (swipe) and Personal Identification Number (PIN) transactions as well. They may be mobile devices that are on the POS via Bluetooth or counter variants connected via Ethernet.

Magstripe Card Reader

Sometimes called a swipe reader, a magstripe card reader is a credit card reader that can only process cards with a magnetic stripe on the back. EMV and PIN transactions are not accepted on this device. For restaurant POS systems, they are typically found attached to the side of a touchscreen monitor.


A PIN (Personal Identification Number) pad is an electronic device used to capture, accept, and encrypt a client’s PIN in a credit or debit card transaction. In the context of POS, they’re offered as a standalone device or as part of a device that’s also a magstripe and EMV reader in one like the Ingenico iPP 350.

C.D. is for Cash Drawers (Not Compact Discs)

Since cash isn’t dead, all cash registers or point of sale systems need a cash drawer to store the bills and coins during a change.

A mechanical device which is used to store coins, bills, and credit card receipts. A cash drawer works in conjunction with a cash register or point of sale applications and can vary in size from 13″(W) x 13″(D) — 18″(W) x 16″(D).

Cash Register Tray

These are inserts that go in the cash drawer. They include numerous bill tray and coin tray compartments to store and organize different financial denominations.

The number of bill and coin tray compartments will be different depending on the size of the cash drawer. Smaller cash drawers might only have four or five coin and bill compartments, while bigger drawers might have six to eight compartments.

Money drawers will come with one cash register , but it’s always wise to buy a couple of extra, so once you change drawers at the end of a change, you can quickly do so with the additional inserts.
R.P. is for Receipt Printers (Not Record Player)

Even though email receipts or text receipts are becoming more popular and widely accepted, there is still a significant need for receipt printers in retail and restaurant industries. From sales receipts to ticket printing, receipt printers are not going anywhere anytime soon.

Impact Printer

Sometimes known as a transport or dot-matrix printer, impact printers can use either wax, resin, or an ink-soaked ribbon that comes in the form of a cartridge and drops to the printer (like ink cartridges at a computer printer) to print receipts and tickets. They are called impact printers because the print head makes an impact on the ribbon and against the newspaper to publish the text and images.

Impact printers are ordinarily employed as kitchen printers as they can withstand higher temperatures without affecting the printing capacity.

Thermal Receipt Printer

Sometimes referred to as a direct printer, thermal receipt printers use heat to imprint text or graphics against a particular kind of paper. These are the most common varieties of receipt printers used at the point of purchase. They are silent, fast, efficient, and cost-effective since they utilize a direct heat source, as opposed to ink to print.

You can also use them as a kitchen printer to print order tickets from the point of sale. However, it’s not the optimal solution. Since the device uses heat as the printing supply, if the temperature gets too hot in the kitchen, you’ll wind up getting illegible charcoal-looking tickets.

Monitors and touchscreens are the principal way that you and your team will interact with your POS system. In some instances, customers may even use them to register for credit card transactions, leave tips, or to choose whether they want a printed or emailed receipt.

Some monitors connect to a separate computing device, while some have a CPU built-in. A smartphone or tablet is an excellent example of the latter.

All-in-one, or AIO for short, is a computer, packed into a touchscreen monitor made for industrial use in self-service kiosks, retail stores, full-service restaurants and pubs (FSRB), or quick-service restaurants (QSR). Traditionally, legacy POS software that is Windows-based or proprietary software systems leverage an AIO solution.


A handheld, touchscreen computing device for cloud-based point of sale systems and other business applications that operate on Android, iOS, or Windows systems. They come in a variety of sizes which range from a 5″ — 12″ screen size.

A touchscreen is an input/output device that connects to a separate computer via VGA or HDMI cable and is a visual display and control centre for computer programs like point of sale.
Think of it as a traditional desktop computer setup. You have a monitor that connects to a separate computer tower, and you control it using a mouse and keyboard.

Monitors used together with industrial computers as two crucial components of a traditional POS setup.

M is for Miscellaneous (And Mindful Merchant)

Since the objective is to make this piece as comprehensive as possible, here are some miscellaneous items that are still important to remember.

Cash Register

The conventional definition of a cash register is a device used to register and compute transactions at the point of purchase. However, over the years as they have evolved from mechanical to Electronic Cash Registers (ECR) to POS terminals and POS applications, the term has become a catchall for those mentioned above.

Sometimes referred to as a pole display or customer-facing display, this is an electronic device used to display transactional activity at the point of purchase. In some states, like California, there is a law that requires businesses to conspicuously display, to the client, the price of every item being rung up.

Industrial Computer

These are rugged computers that you can configure with a variety of specs like processing speed, storage (memory), operating system, and connectivity such as Bluetooth or WiFi capabilities based on your precise needs.

It is similar to buying a personal computer from a manufacturer like Dell or Hewlett Packard (HP). Unless you’re a Mac user, PC manufacturers typically will allow you to customize similar specs when you buy a computer directly from them.

Industrial computers are used in conjunction with touchscreen monitors and ruggedly built to withstand the harsh conditions of a retail or restaurant environment such as extreme temperatures or storage in a dusty corner.

P.O.S. is for Point of Sale (Not Piece of Sh*t)

Now that you understand the hardware components let us talk about software; which is the most significant part of finding the very best POS system for your small business. Although some POS software can squarely be a piece of sh*t, not all of them are. That is why we urge you to keep reading, so you’re more educated about point of sale. The more you understand about POS, the easier it will be to weed out the sh*tty solutions.

A complete point of sale system is made up of hardware, which are the peripherals we discussed at the start of this post, and applications. The program is the brains behind the whole operation.
It’s responsible for tracking stock, so you never run out of stock on your most popular items. It can record employee hours, so you always have real time insight into labor costs. It can track customer information along with purchase history to help with your marketing initiatives. And best of all, it is going to take all those data points, and more, and pack them into detailed reports — so you can make smarter, data-driven decisions about your business.

Together with understanding how the software functions, there’s some jargon you will need to know. Let us tackle the point of sale applications related terms.

Legacy POS

Legacy POS, also referred to as on-premise POS, utilizes a conventional software distribution model. With legacy POS systems, the point of sale software application is installed on a local server or an industrial computer like we previously mentioned. As a result of this, the POS software and any related data, like sales records, can only be accessed when you’re in front of the computer or connected to the domain.

The best way to visualize this is to picture yourself saving a file on the desktop of your laptop. You may only access the document from that computer — unless you use a remote access tool, but that’s an entirely separate conversation. So, if you’re at work and you need a file from your notebook that is sitting at home, you are SOL (Sh*t Out of Luck).

You’re also SOL because you’ll pay close to a thousand dollars or more, upfront, for the one-time purchase of the program. If the POS provider makes software updates and improvements in the future, those will cost you additional; as will customer support.

Cloud-Based POS

A cloud-based POS system is the opposite of a heritage POS. Rather than information stored on a local device on your storefront, with a cloud solution, data is stored on remote servers (these are preserved by the POS vendor) and the software is accessed via the web.

Since you access the software and data on the internet, that’s means you can get it from almost anywhere, at any time. From house or at the beach, you can see what is happening in your shop without really being there, and that’s peace of mind for any business owner.

In the modern fast-paced, mobile world, cloud-based systems like ConnectPOS’s iPad POS, are becoming the new’norm’ for point of sale software. Cloud solutions utilize a Software-as-a-Service (SaaS) business model where you pay a small recurring monthly fee, and it includes all the updates and customer support you will need; at no extra cost.

Mobile POS (mPOS) systems set cloud-based applications with dedicated mobile devices such as smartphones or tablets to perform acts of a point of sale system. It might be a native application that you download from the app store or a web-based POS solution that you access from the device browser.

Many cloud solutions are designed especially for mobile devices. Therefore, providers often advertise them as mPOS, so the consumer understands there’s a level of mobility with the software solution. Since mPOS solutions are a newer and more modern development, they are often a lot more user-friendly compared to legacy POS systems.

In addition to deciding on a legacy system or a cloud-based solution, features are going to be a primary focus when choosing a POS system. Attributes are inherent in point of sale systems while others communicate via integration into 3rd party software applications.

Accounting Software

Software used to streamline business accounting processes. Many point of sale systems will have an integration with a third-party small business accounting solution like QuickBooks, while others may have a simple general ledger or invoicing software built into the POS.

Customer Database

A customer database stores customer contact information such as an email address and phone number. Some databases can also track customer purchase history that’s particularly useful for marketing initiatives.

Email Marketing

Email advertising is the electronic version of standard postcard advertising. Most POS systems integrate with a 3rd party email marketing platform such as MailChimp.

Employee Management

These tools cover the process of managing employees like contact information for easy access, shifts for reporting and accountability, scheduling, and labor cost for payroll. Knowing your real time cost of labor can help you ensure you maintain a healthy bottom line. Based on the particular sector, payroll cost can vary from 10 — 40 percent.

The procedure for handling inventory such as controlling and monitoring the transfer of goods from initial order to customer buy. Managing quantities on-hand, item cost, retail price, and everything in between.

Piggybacking off of a client database are loyalty programs. Loyalty programs keep track of customer information and purchase history like a client database, but it also lets you build loyalty campaigns as an incentive to drive and reward customers for their loyal buying habits.
A typical example is for customers to earn points for every dollar they spend. Once they reach a spend threshold, they will be given a reward like a discount on their next purchase.

Credit Card Processing

Credit card processing is an extensive topic so, in this context, we’re going to provide a birds-eye overview. If you would like to learn about the complete ins and outs of credit card processing, check out our blog post, the way to Accept Credit Card Payments — The Ultimate Guide.
At a high level, credit card processing is a service that allows merchants to accept credit and debit cards at the point of purchase. From the money collected from payment card sales, a small percentage, such as interchange-plus rates are, paid to the Merchant Service Provider (MSP) and card networks, and the rest is deposited directly into the merchant’s bank account.

Gift Card Processing

Store-branded gift card processing is a lot like credit card processing. You require a gift card service provider so that you can add and subtract value for cards purchased and redeemed at the point of sale.

The huge difference between store-branded gift cards and gift cards with a card network logo like Visa or Mastercard, is that store cards function on a closed-loop network; meaning that the communication and exchange of cash only exist between you, the provider and your customers.
Gift card sales are increasing year-over-year, and restaurants and retailers are dominating the most popular gift cards by category. They’re a great alternative to paper gift certificates which must be redeemed manually and integrate with your POS software.

Ecommerce Integration

Ecommerce integration is a connection between your POS solution and a 3rd party ecommerce platform. There’s direct, real-time communication between both channels so you can handle both your physical inventory and your online product from one central place.

Online Ordering Integration

The ecommerce equal for the foodservice industry is online ordering. Online ordering is a link between your point of sale system and a 3rd party online ordering platform. It’s direct, real-time communication between both channels so when a customer places an online order, it will print to the designated reception printer within the POS network.

Reporting and Data Analytics

Sales analytics and reports are necessary to understand the general health and performance of your small business. When looking for a POS system, it is not about the number of reports the solution offers, but the quality of these reports. Here are a few you will want to have:

  • Total sales report
  • Sales report by item, department, and category
  • Sales report by tender type
  • Employee reports
  • Shift reports (X accounts, Z reports)
  • Inventory reorder reports
  • Customer reports
  • Supplier reports

Find Your POS System

Now that you understand standard POS terms, their significance and their place within the point of sale ecosystem require a while to think about what type of POS system will be the ideal solution for your business. What are some factors you consider essential and ones that can help you run a more efficient operation? Once you have these answers, you’ll have successfully defined your POS system meaning, and you may begin vetting POS solution providers. Now go out and begin!


  1. https://www.connectpos.com/best-shopify-pos-apps-for-retail/
  2. https://www.connectpos.com/top-payment-gateways-for-pos/
  3. https://www.connectpos.com/must-have-pos-features-for-your-check-out/

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