Need a POS solution? Do your homework first

Part one of a two-part series that highlights some of the points to be considered before purchasing a point of sale (POS) solution. Some people undoubtedly have been down this road before and will recognise the warning signs. For those who are about to embark on this venture, it will shed some light on the various issues that pave this treacherous road, and potential purchasers are well advised to do their homework before making a decision.

Although a POS solution is a vital part of any retail or hospitality business, history will show that it often becomes little more than an `afterthought` or `grudge` purchase. Often the POS system is seen only as an overpriced cash drawer. In such cases, the `one tool` that is supposed to provide an insight into how the business is really doing, has been reduced to provide a menial task - it is simply a place to store cash. These sites are doomed to failure, and upon close scrutiny one will see the retail industry has many such casualties.

Instead of thoroughly researching the company`s requirements and establishing which POS solution will best meet the needs of the business, purchase decisions are instead based on inaccurate or invalid assumptions. Just because someone through association uses a specific product in a similar environment, it would be incorrect to assume it will work for your business. Many take hearsay as advice, yet they are not in a position to validate if the product is really working for the person that provided the reference.

Certain popular accounting programs may offer a POS module as an `add-on`. It is a vital mistake to assume that a standard accounting system would make a suitable POS system simply by adding a cash drawer and a receipt printer. Making decisions based on such assumptions can become a costly business hindrance down the line. POS fulfils a vital function in the business, and as such, it is mandatory to do your homework prior to committing to a specific solution or package. If the correct solution is selected, it will save a company time, effort and money, supporting all aspects of the business and catering for future growth. A good POS system is supposed to do more than just store cash. It also is supposed provide meaningful information about your business, allowing you to make informed decisions and navigate the business into a more profitable direction.

This is according to Peter Held, managing director of Apex Cash Control Solutions, a distributor of turn-key POS hardware and software solutions.

However, the road ahead does not have to be quite as treacherous. There are measures one can take to avoid the pitfalls. The first critical requirement prior to selecting a POS solution is to conduct a company-wide needs analysis. It would be a mistake to do this purely from a management perspective; input from a grass roots level must be included as the needs of a financial person are by nature uniquely different to those of a sales manager, sales assistant or waiter.

A wish-list should thus be created, which, when summarised, ultimately ensures the needs of the business owner, as well as individual areas of business such as stock control, the buying department, debt collection and sales, among others, are catered for. A collaborative `needs analysis` is therefore essential to identify a solution that meets the requirements of each segment of the business. This wish-list becomes the "blue print" for the system, which must ultimately be compared with the POS package under consideration. Whilst it is not easy (or likely) to meet all the criteria, as a rule, one should work on the basis that if the "fit" is not at least 85%, look for an alternative product, as continuing with the same product is almost guaranteed to cause problems at a later stage.

Secondly, we work on the assumption that the purpose of the majority of new business ventures is to make money. Furthermore, we assume the company vision will include growth and expansion strategies that will increase profitability. This being the case, it will therefore become critical to select a POS solution that will meet these needs. For example, a business in one specific location might be the starting point for a business venture. As more and more profit is made, additional branches are being opened. The establishment of new branches in different locations will turn a `once small operation` into a larger organisation, thereby changing the business profile.

It is at this point that organisations often realise their POS solution does not cater for this expansion. No amount of `fancy footwork` will resolve this problem and often results in a `rip and replace` exercise - a costly and time-consuming one at that.

A POS solution that has the capability to support multiple branches/sites delivers the ongoing benefit of controlling the business more effectively. A `head office` could then be the base for the operation, controlling purchasing, stock movements and inter-branch transfers, while monitoring sales and profitability by location. An enterprise-wide view also enables the business owner to establish sales trends and patterns across specific branches, areas or regions.

If this control is not established from the onset of the business, future complications must be expected. Not having a holistic view of the business, or being able to keep your finger on the pulse of the operations equates to a loss of control. It does not matter if it is a small business or a head office with several branches -- if you can`t measure it, you can`t manage it. Providing for future growth and expansion is a key consideration when investing in a POS solution as it lowers the risk of having to reinvest (or the cost of losses sustained as a result of the lack of control).

Speed and accuracy of processing (at the point of sale) is also an important purchase consideration. If sales processing is not quick and efficient, queues will develop, negatively effecting customer satisfaction and decreasing service levels. There are many additional issues affecting the sales operation. For example, a restaurant that features an impressive and well-stocked wine cellar might want to exercise more stringent control. It is easy for a waiter to deliver a bottle of expensive late vintage wine to a patron, mistaking it (or deliberately) for a lower cost vintage from the same house. Barcoding individual bottles will in this instance assist in the precise identification of the vintage -- not something a manager of the back-end operation may initially consider important.

The back-office functionality places different demands on the system from that used in the front-end operation. Besides efficient accounting, the back office system holds the key to all the relevant customer purchase data. If client information is recorded, marketing campaigns can be run from a CRM module.

Assuming the system allows it, the purchasing process can be directly related to purchase and sales patterns of certain stock lines, based on historical information.

In part two of this series, "local versus international" solutions will be analysed along with the issue of support and total cost of ownership.