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Merchant Account Guide > Merchant Account News > Small business owners find silver lining in cloud-based POS systems


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Small business owners find silver lining in cloud-based POS systems

If your business is growing, storing your transaction data in a fixed location might no longer make sense. That's why many merchants are choosing cloud-based point-of-sale (POS) systems over traditional in-house POS systems.

Storing your data in the cloud could save your business time and money -- yet there are risks to consider before you leave the ground.

Understanding cloud-based POS systems

The "cloud" loosely refers to the network of resources available to anyone with an Internet connection.  A cloud-based POS system is a system hosted on the Internet by software-as-a-service (SaaS) vendors, which allow merchants to rent space and Web-based software instead of using their own software and their own on-site computers. Using the cloud has numerous benefits, beginning with significant upfront and ongoing cost savings. POS-system

Think of the difference between buying and renting a home. If you buy a house, you (or your mortgage provider) pay a very large sum of money upfront. If something goes kaput (your air conditioner, for example), you must pay to have it repaired or replaced.

On the other hand, if you rent the home, you simply pay monthly rent, and the broken A/C is your landlord's problems. So are updating the property, keeping it up to code and paying for ongoing expenses.

A similar principle applies to SaaS and cloud-based POS systems. The upfront cost for traditional POS hardware and software can be steep, especially for small businesses owners. If the business's computers crash, are hit with viruses or slow to a crawl during busy periods, it is the business owner who is left footing the bill, dealing with the fall-out and sometimes losing customers.

That need for damage control and maintenance is why the cost of an on-premises POS system can be as much as 55 percent higher than that of a cloud-based one, according to Hurwitz & Associates data cited in a recent white paper by POS system provider Retail Anywhere.

Hurwitz conducted an analysis that pitted a cloud-based POS system against a proprietary one, for a small company with 100 employees who had access to the POS system. It estimated that the total four-year cost of cloud computing would be more than $730,000 less than on-premises POS systems. For in-house POS systems, IT infrastructure costs ate up 11 percent (roughly $172,000) of the total four-year cost. The IT infrastructure costs for cloud-based POS systems? Zero.

Do your research
While most cloud-based POS systems offer standard benefits -- vendor-provided security, accessibility from anywhere via the Internet and compatibility with any operating system -- POS systems are not one size fits all. If you decide a cloud POS is what your business needs, do your research and ask the right questions. In addition to finding out the costs, payment specifics and contract terms, here are some additional questions to ask a potential vendor:

  •   How accessible is it? Cloud-based POS systems are accessible from an ever-growing number of devices, from PCs to Macs to tablet computers, to smartphones. Find out which devices work with any system you're considering.
  • Is it compatible? If you use POS equipment -- a receipt printer or card reader, for example -- make sure your cloud-based POS is compatible.
  • Is there free support? Many vendors offer free support, but ask about their service provisions to be sure.
  • Are there additional built-in features, such as inventory management, marketing controls and integration with other software? If so, what are they and do they cost more?
  • How fast can the vendor get your system up and running?
  • Liability issues. What happens in the event of a system crash, etc.? What type of customer service is available and is it 24/7?
  •  How is customer data stored and how well is it protecting from theft?
Possible risks in using the cloud
Cloud-based POS systems come with some degree of risk, according to Tapas Technologies, a company that provides inventory management tools and analytics for the hospitality industry. Some risks include:
  • Cloud network outages. A significant outage could prevent the merchant from taking orders for days on end.
  • Data privacy. Read the fine print. A notation saying the data is "secure" or "private" is not specific enough. Make sure you do not sign a contract that gives your POS provider permission to share your data with others.

    Moreover, because SaaS companies often store several business's data in the same place, they can be targets for hackers. Since your data is out of your hands, you have to rely on your SaaS provider to keep it safe.
  • Internet problems. If your business has a slow connection, or one that goes down regularly, that can slow the interface with your data in the cloud -- and that can mean poor customer service and lost revenues. Find out if your POS provider has offline storage capabilities or other ways to address Internet issues.

On the horizon
As the need and demand for cloud-based POS systems increase, so will the available products and options offered by vendors. And, as businesses continue to make use of mobile payments and registers, the ability to connect to their data from anywhere may become an increasingly attractive option.

See related: Manuy small merchants ignoring security standards, 7 things you must know about credit card processing

Published: May 31,2023

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