- By Bob Twain
Did you know that every POS system will have a different level of integration to accounting, ecommerce, rental, shop management and many other software modules? And the level of integration can affect your business productivity?
When discussing POS accounting software, you might not realize that there's a difference between the terms "integrated" and "interfaced". You'll hear these terms used interchangeably but there's a subtle (yet significant) difference between "integrated" and "interfaced" products.
For example, some POS systems interface (or link) to another accounting system like QuickBooks or Peachtree. And some POS systems will have fully integrated accounting built into the software. So what's the difference?
Let's start with their definitions (according to the dictionary).
Interface. A point at which independent systems or diverse groups interact.
Integrated. To make into a whole by bringing all parts together; unify.
Like I said, a subtle, yet potentially significant difference.
In the software world, integrated modules use the same data files and information is updated in real-time. The data is consistent across all modules, offering maximum integrity - so you save time and avoid double-entry.
Interfaced modules use software protocols to translate and transfer data between them. Software Companies usually write interfaces so they can communicate with third party programs. The interface allows you to quickly send information to the third party program so you don't have to re-key the information. The drawback is that the interface needs to be triggered manually and it doesn't happen in real-time.
So what about your POS and accounting software? Should they be interfaced (linked)? Or should they be integrated (built-in)?
Well. it depends on your situation. I'll try to explain your options, so you can decide for yourself.
Most POS systems in today's market have point of sale, inventory, customers, purchasing, and accounts receivables built-in and tightly integrated into the software. All of these modules are tightly integrated for a good reason. In fact, it's critical for all of them to seamlessly share and update information.
For example, when you create an invoice you're using the "point of sale" module. When you complete an invoice, the point of sale module instantly updates your inventory quantities in the inventory database. The point of sale module also updates the customer history, accounts receivables, and sales history databases.
Without "complete integration" your inventory, accounts receivables and sales history will get out of date. Imagine how many problems that would cause. The software would be virtually useless.
On the other hand, modules like Accounts Payable and General Ledger don't have to be built-in. In fact, most POS systems offer accounts payable and general ledger as optional solutions. The only problem is that every solution works different.
For example, some POS systems will link to other accounting software packages. Some POS systems will offer built-in accounting. Some POS systems won't offer anything. And of course, every POS Company will tell you that their way works the best.
So what's the difference?
Option #1 - Update your accounting software by hand
Some retailers will take their end of day reports from their POS software and enter daily transaction totals into the accounting software by hand. This is by far the cheapest method. And the most time consuming.
I don't recommend this method. Why transfer everything by hand when most POS systems will send the information automatically? Not only is it a waste of time, but it's also prone to errors. You're better off letting the computer do the work.
Option #2 - Link to a separate accounting system
Many POS systems link to programs like QuickBooks, Peachtree, Simply Accounting, AccPac, or Business Works.
Most links allow you to send sales, purchases and inventory adjustment transactions from your POS software to the accounting software. Keep in mind, most interfaces require you to trigger them manually or they run during the end of day process.
Some POS systems offer more advanced links that update information in real-time, but they all work different. Here are the different types of links that I have seen:
- General Ledger Only Interface - Some POS systems will only interface to the general ledger. This means you have to update your accounts payable manually, which isn't big deal, since there's not much information to post. However, it does take a little extra time and it's prone to human error.
Advantages of a separate accounting package include:
- Save money - If you already have accounting software, you can save money since you don't have to pay for the "add on" POS - accounting modules.
- Out-of-date info - Not many interfaces update information in real-time. The information is usually sent in batch files at the end of day. So your accounts payable and general ledger information is not always up-to-date. (This might not be an issue for you, since you can access current sales, receivables, purchases, inventory status and lots of information right in your POS software.)
an update to their accounting software, you shouldn't load it until the POS software has an update that supports it. Otherwise your accounting totals will be wrong!
Option #3 - Utilize accounting software that's built-in and fully integrated
Some POS companies will offer their own accounts payable and general ledger software that's tightly integrated and built into the POS software.
Some of the advantages of built-in (integrated) accounting include:
- Real-time updates - If the POS system sends line item detail, then all information is updated instantly in real-time. So your accounts payables and general ledger transactions are posted as soon as the sale or receiving transaction is completed in the POS.
- Poor design - You could get stuck with poorly designed accounting software. Not all POS companies understand how to design a good accounting system. Just because they offer integrated accounting doesn't mean it's good. It's not their specialty. Your odds are better if the accounting system was designed by specialists.
Whether the POS system uses an interface or it's integrated, they all work different. And just because the sales literature says the accounting is integrated, doesn't mean it really is. The words interfaced and integrated are often used interchangeably, even though they have different meanings.
In addition, some POS systems will not store or update enough information. If a piece of information is missing from their database or it's not included in the interface, you'll have to update information by hand. That's why it's important to ask the POS Company. "What information is sent to the accounting modules?"
It's also important to choose a POS and accounting software with a proven track record. Because whether the software is built in or seperate, there can be plenty of problems with the software.
In order to figure out how the POS system truly handles accounts payable and general ledger accounting, ask the POS Company these questions:General Questions
- Do you offer General Ledger or Accounts Payable built into your software?
- Does the interface link to the accounts payable?
- Is the accounts payable module updated instantly? Or do I have to import it manually?
- Does the POS software send line item detail or batch summaries to the accounts payable?
- What information is sent to accounts payables?
- Does the interface link to the general ledger?
- Does the POS software send line item details or batch summaries to the general ledger?
- Does each general ledger entry show information like the customer ID and transaction number so I can trace back to the invoice, purchase, or receivable transaction in the POS software?
- Does it update the general ledger instantly or do I have to post the transaction manually?
- What information is sent to the general ledger?
- Does the POS module send line item detail or batch summaries to the accounting module?
- Is the information updated in real-time?
- What information is sent?
- Does each general ledger entry show information like the customer ID and transaction number so I can trace back to the invoice, purchase, or receivable transactions?
- Can I view general ledger entries and drill down to view things like the invoices, adjustments, receivables, or purchase transactions?
As you probably realized, both "built in" and "separate" accounting systems have pros and cons. In fact, I don't have a preference either way. It really depends on your situation.
I know there's a lot of information and options to consider, and it can get a little overwhelming.
That's why I created some tools to help.
Here's how to quickly find and choose the best POS and accounting software system for your business.
Your easiest and most effective route will be to use the POS Software Buyers Guide. It will make it much easier for you to throughly compare each POS - accounting system and figure out which one is best for your business.
A few things you'll find in the buyers guide include:
- A detailed checklist so you don't miss any important POS or accounting software features.
- An easy to use comparison template so you can determine which POS accounting system has the features that you need.
- A searchable list of 350 POS systems categorized by industry (apparel, motorcycle, liquor store, etc, etc).
- Over 200 unbiased POS software reviews that will make your decision easier.
- A step by step evaluation process that will ensure you choose a POS system that gives your business the highest return on investment and biggest boost in profits.
- An optional "filled in" comparison chart for certain types of retail businesses -- it includes a detailed 459 feature comparison of 18 top retail POS - accounting systems and how they stack up against each other.
- And several other helpful tools.
To Your Success.
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