3 Important Questions Your POS System Can Help Answer

Does your business have a Point-of-Sale (POS) system, or do you have an old-fashioned cash register? This article is written for both those who already have a POS system and those thinking about buying one. The majority of benefits of a POS system are well known: they reduce errors in calculating customer bills, they make bookkeeping much simpler, and they provide inventory tracking. However, one benefit is not frequently discussed -- they can help you make better decisions about running your business.

Question 1: What type of items should I be selling?

Many retail businesses look at sales levels for different items to make decisions about what products to carry or services to offer. Sales is one part of the equation. However, the number of sales is not directly correlated to profits. In fact, companies that focus on sales may end up selling high-turnover items that have very low profit margins.

Many POS systems allow retailers to report not only on the number of sales generated by item, but also profitability by item. For example, ShopKeep gives retailers the option to enter markup or profit margin. An item that costs a store $10 to buy and sells for $15 would carry a 50 percent markup and 33 percent profit margin. Combining this markup or profit margin with sales enables ShopKeep to report profitability by item in dollars.

So should one choose items based on profitability? I think many people know the answer to that question is "not exactly." There are other factors, such as what items consumers expect you to have, and how much shelf space an item takes up. But no informed discussion of product mix should happen without information about profitability.

Question 2: What hours and day should my business be open?

Do the majority of sales come during the week or  weekend? Are sales scattered or do they come at specific times during the day? Modern POS systems can provide this information.

If many sales are coming during the first or last hour of business, you might want to consider opening earlier or closing later. Conversely, if sales are nonexistent during the first or last hour, you could shorten hours on that day of the week. This decision should not be made based on one week of data, but many. Seasonal and holiday issues also need to be taken into consideration.

(What is the best POS System? POS system recommendations from Fit Small Business.)

Question 3: Who are my best salespeople?

Regardless of your compensation strategy, you should know which salespeople generate the most business. This can be done in a couple ways. You can have the person at the cash register enter in the name of the person who helped the customer into the POS system when a purchase is made, or simply look at the sales numbers during the hours when particular salespeople are on duty.

Who your most effective salespeople are might surprise you! For example, I had one salesperson with whom customers loved to talk. While he had a very high percentage of the customers he spoke with move forward with a sale, he spoke to less than half the number of customers as other salespeople. His contribution to the firm’s numbers were worse than the average salesperson.

Knowing the productivity of salespeople can help you figure out who to give more or less hours, recognition, and compensation.