Many businesses use point-of-sale (POS) software to ring up sales, but what some fail to realize is that these systems have functionality that far exceeds that simple act. POS software tracks sales data, applies discounts and promotions, retains customer information, generates sales forecasts and reports, manages inventory and performs analyses of cost, price and profit, as needed.

However, the most important function a POS software system performs is tracking a business's sales, inventory and customers. Here we'll take a look at each function in detail - and what it can add to a company's bottom line. (Learn more about POS systems and compare free quotes from POS systems providers here.)

Tracking Sales

POS software can spit out all kinds of data about a business’s sales, many of which can help a company manage its business more effectively. What's the sales volume. What’s selling? How much is it selling for? What is it being sold with? When is sales volume the highest, and when is it lowest? How high can you raise prices before customers stop buying? How low can you drop them before you go into the red?

The reports created by POS software can be generated according to any number of parameters, making it possible to view sales data by department, by day, by price and to sort by many other metrics. By carefully assessing this information, businesses can identify issues in the sales process, create a future sales strategy and find places where changes to prices or inventory could increase revenues without causing a negative impact on sales. Think you can do this without hard data? Statistics suggest otherwise.

  • Emotional pricing was one of several elements of what researchers called "incompetence," which accounted for 46 percent of startup business failures in the U.S. (University of Tennessee).
  • 56 percent of manufacturers are two weeks or more behind on sales predictions, and 19 percent are a month or more behind due to delays in analyzing their POS sales data. (AMR Research).

Tracking Inventory

POS tracks inventory as it enters a business through to its final sale. Just as a business owner will ask questions of the software regarding retail sales, they can also ask questions like: What's on the shelves right now? What's in stock? What is running low, how often does it run out and how quickly can it be restocked?

POS software can be used to view the sales history of a particular inventory item. That includes the rate at which it sells, the average number of items on hand at all times, the price an item sells for, and the amount of revenue the business gains from the sale of that item.

Assessed collectively, this data can inform promotions, purchasing practices, stocking strategy and overstock volume. It also helps fulfill the goal of always having enough product in stock to meet customer demand, but never losing money due to insufficient or excess inventory.

For example, by implementing an inventory tracking solution, Wholesale Boutique, a fashion accessory provider filling 30,000+ customer orders per year, was able to decrease its order processing and shipping time by 35 percent, according to a report by Fishbowl Inventory.

Similarly, working together, supermarket Giant Eagle and beverage company Anheuser-Busch used the predictive modeling capability of their POS data to produce 32-day forecasts of product demand. As a result, they reduced out-of-stocks from 6.6 percent to 3.4 percent and generated a 3 percent increase in sales, according to a report by Booz Allen Hamilton. (Companies are increasingly using mobile payment systems as part of their POS solutions. Learn more in Mobile Payment Systems: We Put Them to the Test.)

Collecting Customer Data

The final type of data that POS software collects is that of a business's customers. This includes their names, payment time, purchase history, purchase frequency, demographic information, contact information, and more. Taken altogether, this data can be siphoned into marketing campaigns and used to identify a target audience, audience segments and potential new markets.

For example, Messina Hof Winery & Resort in Bryan and Fredericksburg, Texas, used a POS system to collect customer information which was then implemented in a targeted email marketing campaign. The company sent 12,194 emails, which had a 31 percent open rate and generated $46,044 in direct sales, according to a report by NCR Corporation. For context: The average email open rate in the U.S. is 19.9%.

Sales, inventory, and customers are the three building blocks for any retail business. That means that businesses need to be able to accurately track and analyze each one in order to ensure success. The data within your POS software can help you do just that. (Compare business POS software, and get competing quotes, here.)