TCO: The Only Number You Need to Know When Buying a POS System

Bematech Blog - October 13, 2017

Businessperson With Stack Of CoinsPlanning on buying a POS system? Congratulations! You’re making a great investment in your business. However, it’s easy to get caught up in the numbers and lose sight of which point of sale system is really the best choice for your business. Calculating total cost of ownership (TCO) is the best way to understand the financial impact your new POS system will have on your budget.

What is TCO?

There is more to the cost of a POS system than just the upfront “sticker price.” What may seem like a great deal may wind up costing you more in the long run because of associated costs and IT support fees. Unless you consider TCO when you’re buying a POS system, it will be impossible to make an “apples-to-apples” comparison of different options. You may also be hit with (and unprepared for) expenditures that aren’t in your budget.

What is included in a TCO calculation?

In addition to initial hardware costs, the TCO for any POS system also includes transaction processing fees. These can vary greatly and can be higher when the system can only be used with specific payment processors. TCO also takes into account software costs, warranty and maintenance expenditures, and training and support fees.

If you are skeptical that TCO could vary significantly from one system to another, consider this real-life example. We performed an analysis of three comparable POS options evaluated by a coffee shop owner. The shop has an average of 200 credit card transactions daily.

The first system has an initial hardware cost of $1,126. Option two costs $1,299 and option three costs $1,044. But this is where the similarities in cost end. Monthly processing fees for these systems are $728, $1,271, and $374, and software costs are $0, $39, and $38, respectively. First year TCO for the three systems are:

  • system one: $10,590
  • system two: $16,551
  • system three: $5,532

This example illustrates that it’s important to look beyond the sticker price to understand exactly what you will pay for a POS system.

What about “free POS”?

Some retailers and restaurant operators choose this option, but there really isn’t any such thing as a “free” POS system. While a company may not charge for the POS hardware or software itself, you’ll still be paying processing fees — and there will still likely be a cost for installation, training, service, support, upgrades, and maintenance. Additionally, you may want or need certain functionality and features a “free” POS system simply doesn’t offer.

All retailers and restaurateurs want to save money when buying a POS system, so it’s important not to commit to a purchase without researching TCO. The best investment is a POS system that isn’t necessarily the cheapest option upfront, but can be operated cost-effectively while providing you with the tools your business needs to operate more efficiently and profitably.

Download our e-book: How to Calculate the Total Cost of Ownership of a POS System for more information on choosing a POS system that’s really the best value for your business.