Using Your Point-of-Sale (POS) Data to Boost ProfitabilityWhat can your point of sale teach you about how to run your business better?
Whether you run a big-box store, are responsible for a franchise, or are an entrepreneuring micromerchant, your point-of-sale (POS) system plays a key role in how your business makes money. But the information collected at the checkout counter is more than just transactional — it can also help you make better decisions for your small business.
“I like to look at it as not just a register, but a machine that captures your resources as well,” said Steven Kim, general manager of the point-of-sale add-on NCR Console. “The point of sale is now a place where we capture data that’s not just about what we sell, but also how we run our business.”
Your POS system can provide a great deal of detailed information about what’s selling and what’s not, but it can also provide insights into your profit margins and help you better manage inventory and labor. More than just adding up item totals, calculating taxes and telling your staff how much change to give, “it’s actually capturing data around every one of those elements,” said Kim.
Here are a few different ways that the data you’re already collecting at the point of sale can help you cut costs and boost profits.
Setting sales goals
One of the best ways to leverage your POS data is by determining achievable sales goals that grow your business. By reviewing your transaction history over time, you can find sales trends based on the month, day and even hour of operation. These can help you set expectations for your business as a whole, as well as for individual employees.
“Once you set a goal, the system starts actively measuring towards your target, but it can go even further than that.” – Steven Kim
Kim said a good POS will not just collect this information, but evaluate the data and provide actionable insights to help your business succeed. “Once you set a goal, the system starts actively measuring towards your target, but it can go even further than that,” he said. Your POS should provide a status snapshot that indicates how you’re tracking against your goals, as well as specific actions you can take to meet your target.
For example, said Kim, “Let’s say we have 10 days left in the month, and we still need another $30,000 worth of sales to meet our goal.” Your POS system can break that down into smaller, more achievable daily goals and help identify what products and services to push to reach your target. “So now the data gives you the suggestion, and it’s actionable,” he said.
Your POS can also help you keep track of inventory and know what products to purchase when.
“Inventory is always tied to what I’m selling,” explained Kim, so it’s good to use a POS system that can evaluate your sales trends and make projections for which goods you should have on hand at any given time.
For example, consider the product needs of a small cafe or sandwich shop. A POS system can show you sales trends for various menu items and break these numbers down to the ingredient level, said Kim. Using your historical sales data, you can make accurate judgements of how much turkey or salami your shop needs to order to be prepared for the upcoming month, so you don’t over-purchase perishable goods but still have enough to meet customer demand, he said.
In addition to capturing transaction data and tracking your inventory, a POS can also help you with scheduling workers so you get more value out of your labor dollars.
“When you’re doing scheduling, you want to make sure that the right people are in the right place,” said Kim. One of the most difficult challenges small business owners face is making sure they have enough staff to maintain customer satisfaction without overstaffing, he said.
Historical data from your transactions can help you identify which staff members are most effective at which station or department, and help you evaluate your labor costs by employee, day of the week and shift.
For example, $100 in labor costs on a Monday may go a lot further than $100 on a Saturday. “The ability to break down my labor costs and compare sales by the day — or even down to the hour — gives me a really big insight into how my dollars are being distributed throughout the day and throughout my restaurant,” said Kim.
Returning to the sandwich shop example, Kim said, “If turkey prices start to go up, I’m not just thinking and guessing if I should raise my prices or not. I actually see that my raw ingredient costs are changing.” Your POS data can help you determine how much to adjust prices to maintain a certain percentage of profit or where you can cut back in other areas to boost your margins.
All the information needed to make decisions like these is already being gathered at the point of sale, said Kim. The key is finding the right POS system that can take this wealth of knowledge about your business and turn it into actionable insights, without extra effort on your part.