Point-of-sale inventory systems: now ready for small businesses

Although the stately cash register might be a traditional symbol of retail establishments, many small-business owners are replacing it with a perhaps less aesthetic but eminently more helpful computer and printer.

The standard cash register captures information on tape, requiring the store owner to re-enter the data into columnar sheets or computer databases for accounting, analysis, or inventory reports. A computer point-of-sale (POS) inventory system, on the other hand, automatically captures a host of information about each sale and instantly updates the inventory database. A retailer can then view on a screen up-to-the-minute information about stock on hand or create printed reports that help in making buying decisions.

While POS inventory systems are not new--large chains have been using them for more than 20 years--what is new is the price. Until about four years ago, most systems ran on mainframe or mini-computers and cost $25,000 and up. Now, a two-computer Macintosh or IBM PC or compatible system can cost less than $4,000 for hardware and software.

POS inventory systems are typically sold as modules. Most systems include at least two computers and printers, one at the checkout counter for POS activities and the second in the back room for inventory reporting. The POS computer can be outfitted with a cash drawer (about $500) that opens only when a transaction is made and a bar-code reader (about $600) that automatically puts in data from manufacturers' or internally generated labels.

The procedure of ringing up a sale on a POS inventory system is much the same as with a conventional register. Using the keyboard or scanning the bar-code label, the clerk enters the product name or number and sometimes the price. The product information then appears on the computer screen. After all purchases are listed, the totals are displayed, and the cash drawer (if used) opens. When the transaction is completed, the printer issues the receipt. While these systems are slightly slower than standard cash registers, this normally is a concern only in high-traffic environments, such as convenience stores, that need faster processing than a personal computer and printer can muster.

The computers can be networked, or disks can be carried between the machines. The same disk-carrying method can be used for multiple store operations. Alternatively, the data can be transmitted from store to store using a modem and standard communications software.

For many retailers, the main advantage of POS inventory systems is that the screen at the register can display immediately which items are in stock at any time. This eliminates the need to leave the register and hunt through boxes to answer a customer's request.

But there are also after-hours advantages. POS systems provide reports that list merchandise that should be reordered because stock has fallen below the recommended level.

Using reports from Electric Merchant, an IBM or compatible-based POS inventory system from Software Creations, Inc. of Tampa, Fla., Karen Boyette, owner of Klassy Kids Boutique, in Brandon, Fla., says placing orders now "takes minutes instead of hours." And stocking is also much quicker because Electric Merchant automatically prints pricing labels after the merchandise has come in the door.

Steven Janus, who uses Retail Engine, a Macintosh-based POS inventory system from Houlberg Development, Inc., of San Diego, says that for the first time, his buying decisions are based on hard data instead of "guesstimates."

Janus owns three Koala Blue clothing stores, one in Honolulu and two on the Hawaiian island of Maui. Each store carries a number of fashion lines, and in the past, Janus had always been in a quandary trying to decide what percentage of his buying dollar should be spent on each line. "Customer buying trends change quickly," he says, "and each store in different. It was almost impossible to keep up with what the customers were buying." Now each month or so, Janus generates a report that shows the percentage purchased per fashion line for each store, and he allocates his purchasing dollars proportionately. For the first time, he says, his inventory is "in line with what the people want," and so it moves more quickly.

Another headache that Retail Engine has cured for Janus is that of reporting general ledger data. Monthly reports now are automatically generated by the software. "I think my accountant likes the system as much as I do," Janus says.

Some accounting packages are adding POS capabilities. Cougar Mountain Software, in Boise, Idaho, sells a popular PC-based accounting package called ACT, which has a POS module called StoreWare. It adds on to an already-installed ACT accounting system, will support bar-code readers and cash drawers, and provides a wide series of reports.

In the 1960s, mainframe-based POS inventory systems cost about half a million dollars and yet were gobbled up by large chain stores that knew a competitive advantage when they saw one. Now it's small businesses' turn. The price is right, the speed is acceptable, and the reporting ability is all that small retailers need.

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