Free POS Systems and the Hidden Costs

An efficient Point of Sale system can help your business in multiple ways, from streamlining orders to helping with inventory management, customer relationship management, analytics and overall facilitating smooth operations. As a result, POS systems have become a necessity for modern business owners.

There are two main components of a POS system: the POS hardware and POS software. The costs involved in setting up the POS hardware are straightforward. All that is required is to purchase the required equipment pieces such as register or operating system, monitor, barcode scanner, receipt printer, and payment terminals.

POS Software costs on the other hand are more complex and depend upon the software you choose. There are paid and free POS software options available. While free POS software can sound tempting, especially if you are a small business trying to save on costs, there are often hidden costs involved. If you are considering free POS software for your POS setup, keep in mind the hidden costs so that you can plan and budget accordingly.

What Is A Free POS System?

A free POS system refers to a free POS software system, as of course, the hardware costs are still involved. POS software systems are generally available in paid models, involving a one-time installation fee, annual subscription payment plans and monthly subscription payment plans. Free POS software plans are available as well, where you get a set of basic features and functionalities for free.

Although free POS software systems are generally recommended for very small businesses, they are versatile and can suit retailers and restaurateurs. Free POS systems are available that are specifically designed for quick service restaurants (QSR), coffee shops, full dining restaurants and small retail businesses.

There are several POS systems available in the market that have a free basic version, such as eHopperand Loyverse. There is also square pos that is completely free but requires you to use Square payment solution for eftpos and credit card processing. In addition, there are paid POS systems that are available with a free trial.

-Also Read: How Much Do POS Systems Cost? - A Complete POS Pricing Guide

How Does A Free POS System Earn?

Any company, business or service provider has to have a means of earning in order to continue providing a service. For many POS system software providers, they strive to acquire customers through free POS systems and then sell those customers other software tools or upgrade to the paid version.

A free POS system is often a stepping stone to more advanced, paid subscription models. By offering a POS system for free, businesses gain familiarity with the platform. As a result, the businesses are more likely to upgrade to a paid model rather than leave and join a different paid subscription service. To encourage upgrades, the free POS systems often have purposefully basic features and functionalities.

Apart from targeting the customers directly, the free POS system can also earn through tie ups with other service providers, payment providers and hardware brands. If the free POS system requires you to use a specific payment mode, hardware or other service, it is likely that the POS system is earning indirectly through that recommendation.

Free POS System Hidden Costs

Unfortunately, free POS systems tend to have multiple costs that might not be transparent up front. By understanding these hidden costs, you can make a smarter decision when choosing a POS system. Based on your budget and business requirements you can choose the best POS system for your needs. Here are the top hidden costs in a free POS System:

• Costs for Transactions

Credit cards and debit cards are among the most popular payment modes for a customer. Accordingly, it is advised to support credit/debit card payments. However, a free POS system may charge extra for supporting card payment transactions. Many times, free POS systems such as Square will make it mandatory for you to select a specific payment processing service which would have its associated merchant fees. The cost for the payment processing is charged as a percent of the transaction amount.

• Costs for Growth in Sales

Free POS systems are generally suited for entry level businesses, and based on the specific system, may have a maximum bandwidth for sales. These limits can include allowing a fixed number of transactions, or sale value, or number of customers. If you cross the imposed limits of the free POS system, there may be penalties applicable or you may need to upgrade to a paid version.

• Costs for Expansion

Although it is common for any POS system to have a limit on the number of checkout points supported, the free models also often have a maximum number of products or SKUs that can be linked. If you want to increase the number of products on offer, you would most likely have to pay extra or opt for the paid version.

• Costs for Added Features

When it comes to features and benefits, you get what you pay for. Most free POS systems will have only basic features available so that the functionality is supported. Useful features for inventory management, marketing, analytics, employee management and loyalty programs may cost extra. For example, if you want to gain helpful insights regarding customers and sales patterns, you would need to pay extra for that feature. Based on the provider, the features available for free will differ.

• Costs for Integrations

If you already have software platforms and applications associated with your business that you want to connect with the POS system, there may be add on charges. Additional platforms include tools for accounting, shipping, eCommerce support, email marketing, and CRM among others. Using the software platforms independently can be time consuming, take up man power and also still risk inefficiencies. The need for POS integration is especially important for businesses that have in-store selling and eCommerce capabilities. If you are offering both, then having un-integrated systems can pose a major challenge.

• Costs for Migration

Migration of information and business data such as product details, pricings, customers, and inventory, onto a free POS system can be a lengthy process. While it is possible to manually upload everything, if you want a swift migration, it may cost extra. In contrast to manual setup, migration is more efficient and accurate, especially if you already have all the data ready.

• Costs for Customer Support

In a free POS system, customer support generally involves added fees for a quick and prompt response. Typically, there is no effective system to contact customer support or reach out with specific queries. As a result, you may have to search on forums or generic guides to solve any issues or difficulties that may come up. With an upgrade to a paid version, you will get much better customer support that is speedy and helpful.

Additional Applicable Costs

Apart from the general hidden costs, based on the chosen provider additional costs may come up from time to time. These include:

• Auto-renewal charges if the initial period of usage ends.
• Changes in processing fees.
• Exit fees or additional costs for switching processors or providers.
• Hardware costs if the free software is not compatible with the existing POS setup.
• Hardware repair costs if there are any issues with the hardware.
• Charges for service fees which may be applicable based on the number of visits or terminals.

- Also Read: Pos System Maintenance - How to Extend the Life of Your POS System

How to choose POS software

• The decision of which POS software to choose is a major one, and should be made carefully, considering the size of your business, current needs, anticipated growth, and expected future needs.
• Business Size: What is your business size? If you have a smaller business with less amount of traffic and sales expected in the near future, then you can consider a free POS system. There are a significant number of hidden costs involved in a ‘free’ POS system, nevertheless, the most obvious benefit is that the service itself is free.
• Expected Features: What features are you expecting? If you require special features in the POS system, or advanced capabilities and linking with an eCommerce setup, then it may be better to invest in a paid subscription directly.
• Business Volume: What is your business volume? If you are dealing with a large volume of products, sales, and/or customers, then a paid software setup will be more useful and suited. A paid system will have better support for large volumes of products and transactions and you can avoid challenges of migrating platforms.
• Compatible Hardware: Do you already have POS hardware? In case you already have hardware, then check to see which software platforms are supported. If you will require new hardware for the free POS software then analyse how it would affect your budget, or if it would be more advisable to get a paid subscription that would support your existing hardware.

A great solution to explore free POS systems is to opt for a brand that also offers paid systems and has options for upgrading as required.

Conclusion

A free POS system has plenty of appeal, especially for businesses that are just starting out. However, it is important to carefully consider the hidden costs and drawbacks of free POS systems and weigh them against the benefits. An effective POS system can bring your business multi-fold advantages and are a great way to boost the success of your business.

The POS Plaza team is understands the intricacies of point of sale systems and can help you define your needs. Our experts can guide you in choosing the best POS hardware and software solutions to suit your needs and fit your budget.