Setting up a hospitality venue, such as a café or restaurant, can be a daunting and expensive exercise. The fit-out, including furniture, kitchenware, cooking and refrigeration equipment, all add up to a considerable investment on the part of the new business owner. With that in mind, it is understandable that your point of sale system is sometimes one of the last things to be thought about.
While, as a POS supplier I feel that point of sale technology is a vital component in any hospitality or food retail business, this article isn’t designed to discuss in depth the reasons why you should acquire a good quality, properly configured POS solution. Rather, I simply want to consider how you should pay for it, regardless of the system you choose – with a particular focus on providing you with the best business outcome in the long run.
There are typically 3 approaches to procuring a new POS system:
- Purchase all of the equipment outright
- Use a ‘software-as-a-service’ POS app – where you can often use your own iPad or computer
- Lease or rent a complete, integrated point of sale system
Let’s briefly consider some of the pros and cons of each of these options so that you can make a better informed choice when it comes time to finance your next POS equipment acquisition.
Outright Purchase of a POS System
This is often seen as the preferred method of paying for your point of sale equipment – it saves money in finance charges and alleviates the fear of being ‘locked-in’ to a POS system or a support provider who wants to keep charging you for ongoing, but seemingly unnecessary services that seem to offer you little tangible value.
However, one of the greatest challenges in any business purchasing decision is finding the balance between getting the right equipment to truly meet your needs and whether or not you can afford it. For instance, some hospitality business owners understand the benefits of a high quality, integrated POS system but have difficulty justifying the expense. Cash flow can be incredibly challenging during the first 12 to 24 months of opening a new venue.
So, should you try and get by with a cheaper option to start with, with the aim of upgrading to something more suitable later? The difficulty with that line of reasoning is that you really do need to take advantage of the workflow efficiencies and ‘business intelligence’ data that a proper POS solution can provide right from the outset. And if you do decide to go with a less effective system in the short term and then need to upgrade, the cost of setting up your system a second time and retraining staff can be prohibitive.
Signing Up for a ‘Software-as-a-Service’ App
The last 5 years have seen massive changes in the POS industry. There are now literally hundreds of POS apps and programs that can be installed on generic computers, tablets and other devices. Even more recently, dozens of ‘software-as-a-service’ (SAAS) apps have become available, with a monthly payment for the use of the POS program itself, and often being able to be installed on your own IT equipment. This is of particular interest to ‘tech-savvy’ managers who have grown up with technology, and are inclined toward the DIY approach.
There is no doubt that point of sale software suppliers that simply charge a monthly subscription can provide a basic solution with a relatively low upfront cost. However there are some cautions to consider before going down this path. For instance, for a reputable POS app, how much does the total monthly cost add up to over an extended period? What is the real cost of the hardware you need to use, particularly if you need to repair or replace it? Most purpose-built point of sale terminals will comfortably last at least 3 – 5 years, so while it seems to make sense to pay $50 – $100 per month for an app from a cash flow point of view, this option will probably not prove to be significantly cheaper over the projected life of the system. This despite the fact that the durability of the equipment and the app’s POS functionality might not be as strong as a traditional point of sale solution, and your sales data may not be useable if you decide to discontinue paying your monthly fee after a period of time.
Rent or Lease a Complete POS Solution
An option that is often overlooked is that of leasing or renting a purpose-built, integrated POS solution. Some shy away from the commitment required for monthly payments or feel that the finance charges make this option needlessly expensive. But in the same way that utilising a POS app has definite cash flow benefits, so too does the lease option, as your business capital is not tied up in equipment but can be used to improve your venue in other ways. And in fact, you can often get a better overall solution for a similar monthly outlay.
There are a number of other benefits from leasing business equipment such as your point of sale system. For example, there may be considerable tax advantages to leasing – the monthly payment can often be written off as a business expense, similar to your rent, or phone and electricity bills. Additionally, at the end of the lease period, it is typically an inexpensive option to purchase the system outright, or even better, roll over to a newer, more up-to-date solution for the same or similar monthly outlay.
Of course, every situation is different and business owners often have their own personal preferences regarding how they want to approach setting up and financing a new venue. In any case, carefully investigate the different options available to you when it comes time to purchase your POS system and weigh up what will be best for you in the months and years ahead.
Article originally prepared for the Cafe POS Solutions blog