Many retail operations use point of sale (POS) systems to capture all relevant sales data at the point of sale: the cash register. You have seen POS systems on your shopping visits to grocery or department stores. As you checked out, the bar codes are scanned on the items you purchased, prices were determined by the accessing of inventory and price list data, sales revenue was recorded, and inventory values were updated. All of these processes occur in real time, and the store can provide to its managers or home office daily summaries of sales by cash register or by product. Many companies adopt POS systems because they enhance customer satisfaction by enabling faster and more accurate checkouts. In addition, POS systems have many features that assist accountants and managers in the company, including the following:
POS systems are not usually connected to trading partners outside the company. The system is an internal system that may have network connections from individual stores or locations to corporate headquarters. Since it usually does not involve outside network connections, it does not pose as many security or confidentiality risks as e-commerce or EDI systems. The POS software system can actually reduce some processing integrity risks within revenue and cash collection processes. The risks lessened are as follows:
Since a POS system does use extensive computer hardware and software, there are availability risks. Hardware or software failures can make the system unavailable for use and interrupt or halt business operations. Therefore, it is important for a company to institute controls to lessen the availability risks. Backup systems and backup data procedures should be in place. The organization should also have business continuity and disaster recovery plans in place.
There are many examples of POS systems in the companies you probably buy from regularly. Retail stores such as department stores, grocery stores, and bookstores, as well as restaurants, may all use POS systems.
THE REAL WORLD
Several years ago, Pizza Hut, Inc., switched all company restaurants to a POS system. The system tremendously increased control over sales, cash, and inventory. Item prices for all of the possible menu combinations are determined at the home office and downloaded into the POS system at each restaurant. These downloaded prices reduce errors such as charging incorrect prices to customers. As the order is entered in the system, a copy of the order is printed in the kitchen so that the kitchen can prepare the pizza correctly with the requested combination of toppings.
Procedures at the end of the day improve control over cash. A report of cash received can be compared with the bank deposit amount of that day, and any differences can be reconciled or investigated. Also, at the end of the day, Pizza Hut's POS system prepares a report that can be reviewed by the managers and staff of that restaurant before the start of the next day. That report shows managers a comparison of carryout, delivery, and instore sales. It also categorizes sales by type of product such as pizza, sandwich, or salad.
More recently, some Pizza Hut franchises have adopted the newest versions of POS software offered by SpeedLine Solutions, Inc. Speedline is the top provider of POS software for pizza restaurants.
In 2011, another Pizza Hut franchisee, Rage, Inc., added a biometric fingerprint identification system to its Speedline POS. Rather than employees using an ID to log into the POS terminal, they now scan their fingerprint. Because of this stronger internal control, unauthorized discounts, payroll fraud, and inventory shrinkage (theft) have been reduced. These problems have decreased because it is no longer possible for a manager to just give his ID to another employee to apply discounts, clock into and clock out of the timekeeping system, or make inventory adjustments.
As you can see, POS adds efficiency, better internal control, and a more efficient interface with the company's general ledger software that makes appropriate entries to record sales, cash, and inventory changes. These processes within the POS system allowed Pizza Hut to improve several aspects of its performance by giving management better feedback. As a result, management is able to use the system to forecast labor needs, control inventory levels, and determine popular sales items to promote via marketing.