This article argues that return on investment analysis is crucial to evaluating a point of sale system. The article gives a brief overview of the most important details that the ROI analysis illuminates.
Many small businesses view the point of sale (POS) system solely from the perspective of cost. Our business needs this equipment,
so how much will it cost us, and how can we limit that expense? This perspective often costs the small business more money in the end.
A point of sale system is not simply an expense. It’s an investment in your business, and like any good investment, it has the potential for a return. The business will achieve greater success by considering the point of sale system from this perspective: How does point of sale earn money?
A point of sale system that earns the business money pays for itself. Therefore, the business should be less concerned with limiting that initial expense and more concerned with fine-tuning a configuration for their business’ needs.
However, the return on investment (ROI) analysis cannot be limited to the potential benefits. In order to have the complete picture, the business must examine the cost of not upgrading. How much money will the business earn if it continues to use the current system? How much money will the business earn if it uses the less expensive system B rather than the more full-featured system A?
Consider how POS can spur or limit top-line revenue:
• Automated recognition of frequent patronage
• Automated volume discount handling
• Efficient management of discounts, promotions and sales
• Highly targeted marketing and promotions
• Seasonal inventory tracking and automatic inventory adjustment
• More cash-in per customer via efficient and targeted up-selling
Those six items are just a subset of all that the point of sale system brings to our business, and therefore these are all factors that must be included in the ROI analysis. Each factor shares a common quality. They all take away a menial task from the human business owner or employee freeing them to do something for the business that a computer cannot replicate.
Consider how POS affects gross margin:
• Dramatic reduction of pricing errors through computerization
• Amazing reduction of waste through automated management of the inventory
• Focused marketing and promotion through inventory analysis
• High-margin up-sells at the point of sale
The key factors above deal with inventory, and inventory is the key to building revenue through the point of sale system. All of these aspects combined create what is known as a just in time (JIT) inventory. JIT inventory system maximizes the business’ inventory dollar in ways that we never imagined prior to the modern point of sale equipment and software. However, while inventory is the key, it is hardly the only aspect contributing to profit. The other factors include labor costs, theft, “under-rings”, marketing, checkout processing efficiency, accounting integration, etc.
How a point of sale system reduces shrinkage and theft:
• Inventory analysis and reports
• Immediate inventory access versus floor counts
• Shrinkage reports highlight products that require monitoring
• Computerized analysis can highlight employee theft at the register
The information presented here should inspire all businesses to perform an ROI analysis before making a POS decision. It is the only way to appreciate fully what that point of sale system will mean to a business.
