How Do Cannabis POS Systems Work? A Complete Guide

Discover how a cannabis point of sale (POS) system works, its components, and benefits in streamlining transactions in your dispensary.

How Do Cannabis POS Systems Work? A Complete Guide
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Lindsay Crafford

Sr. Content Marketing Manager, Dutchie
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How Do Cannabis POS Systems Work? A Complete Guide

Discover how a cannabis point of sale (POS) system works, its components, and benefits in streamlining transactions in your dispensary.

Disclaimer: This content is provided for informational purposes only and is not intended as legal advice. You are responsible for your own compliance with laws and regulations.

Preview of what's inside

Dispensaries come in all shapes and sizes, but if thereโ€™s one thing every cannabis retailer needs, itโ€™s a solid point of sale (POS) system.

The POS plays a key role in any dispensaryโ€™s day-to-day operations, supporting the entire checkout process. You use your point of sale system to ring up sales, collect payment, and ensure that transactions are processed quickly and efficiently.

But how do cannabis POS systems work, exactly?

In this guide, weโ€™ll look at the inner workings of cannabis point of sale systems and shed light on how they work. Youโ€™ll learn:

  • What is a cannabis POS system?
  • What are the different parts of a POS system?
  • How does a cannabis POS system work?
  • Getting the most out of your cannabis POS system

Letโ€™s get started.

What is a cannabis POS system?

A cannabis point of sale system (also referred to as a "cannabis POSโ€ or โ€œdispensary POSโ€) refers to the bundle of hardware and software you use to facilitate in-store sales. It also serves as your record-keeping solution for transactions, enabling you to track your revenue, inventory, customer data, and more.

What are the different parts of a cannabis POS system?

To better understand how a POS system works, letโ€™s review the different components a point of sale systems can have. These solutions are generally made of two key parts: software and hardware.

Cannabis POS software

Cannabis POS software is the program or application that executes the various functions required at the point of sale. At the most basic level, POS software enables you to calculate transaction amounts, track sales and monitor inventory.

Other POS solutions have more advanced offerings. Dutchie POS, for example, has built-in loyalty features, sophisticated reporting capabilities, and integrated payment processing.

Cannabis POS hardware

Hardware includes the physical components of your point of sale system. Think of hardware as the body of your POS, while software is the mind. Below are the most common hardware used with a cannabis POS system.

  • POS terminal: This is the device on which the POS software runs. It can be a desktop computer, laptop or mobile device (like a tablet). Some POS providers may offer specially-designed hardware that works with their proprietary software.
  • Cannabis payment processor: If you accept cashless payments (and you absolutely should), you need a payment processor to facilitate those transactions. Discuss your options with your provider to ensure youโ€™re using processors that are compatible with their solution.
  • Barcode scanner: Ideal for dispensaries with a large catalog, a barcode scanner saves you time from having to manually type or search for products. Just scan the barcode and your POS will automatically add the product to the transaction.
  • Receipt printer: If you provide physical receipts to shoppers, then you need a device to print those receipts. This is where the receipt printer comes in. When connected with your POS system, the printer will automatically produce a receipt when the transaction is complete.
  • Cash drawer: This device primarily holds cash, so you can cater to customers who prefer this payment method. Your cash drawer stores cash so you can collect payments and provide change when necessary.

How does a cannabis POS system work?

Now that we've covered the different components of a point of sale solution, letโ€™s look at how they all come together. Hereโ€™s a step by step process of how a cannabis POS system works.

How a cannabis POS system works when ringing up sales

Point of sale systems are most visible during the checkout process, which typically involves the following steps:

1. Record the items being purchased. โ€

First, the customer presents the items they want to purchase to the budtender.

From there, you (or your budtender) would record the items and quantities being purchased by scanning them into the POS (if thereโ€™s a barcode scanner). The software will then record the purchase data (item name, quantity, etc.) and display the information on the screen.

2. Collect and process payment.

Once all items have been added to the sale, the budtender initiates the payment process by clicking or tapping the appropriate button on the POS display.

At this point, they would ask how the customer would like to pay. If theyโ€™re paying in cash, then the budtender would simply take the payment, open the cash drawer, put the cash inside and hand the customer their change (if needed).

If the customer is using PIN debit to purchase their products, then the budtender would select that payment method in the POS and prompt the customer to insert their card via the PIN debit terminal.

The payment processor connects and interfaces with the cannabis POS system to securely collect the payment and process the transaction*.

*Note: if your POS system is integrated with your payments solution, then accepting payments will be a seamless process. โ€But if youโ€™re using a non-integrated payment solution, then your budtenders must manually enter the payment amount into the point of sale software before completing the transaction.

Needless to say, opting for integrated payments offers a much more enjoyable experience for both your team and your customers. When your POS and payment terminals โ€œtalkโ€ to each other, thereโ€™s no need for manual data entry, which means fewer errors and faster transactions.

3. Generate a receipt.

Once the payment is approved, the POS system completes the sale and generates a receipt. This usually involves printing a physical receipt.

4. Offer loyalty points and rewards.

โ€This is an additional step that takes place in dispensaries that offer loyalty programs.

If you reward shoppers for their purchase, then your checkout process would involve a loyalty component, in which you ask customers to provide their details. This could be their email, phone number, birthday, or whatever info you use to track your loyalty program members.

As for when this step takes place, that depends on your POS setup. In most cases, loyalty points are recorded when the sale has been approved and before painting the receipt.

How a POS system works in the back-of-house

The POS system is certainly a critical part of the checkout process, but letโ€™s not forget that it also plays an equally important role in your dispensary's back-of-house.

While all of the steps we outlined above happen at the counter, there are some essential functions that are taking place behind the scenes. They include:

Updating inventory levels.

As items are added to the sale, your POS system is busy tracking and recording those quantities in the background, and it updates your catalog accordingly. So, if the customer purchases three pre-rolls, then your POS will update the quantity of that item so you always have an accurate record of what you have on-hand.

Depending on how your POS system works, it can also prompt you to reorder certain items if quantities fall below a certain threshold.

Recording revenue data.

Your point of sale software can also record all transactional data that goes through the system. This includes sales, payments, returns and more. The software tallies and organizes all that data, and in some cases can display them in a dashboard for easy reference.

If your point of sale solution is connected to your accounting software, then your POS can also sync financial data to help you stay on top of your books.

โ€Updating customer data.

If you collect and track shopper data, your POS system can keep everything in check. This includes recording your customersโ€™ contact info, purchase history, accumulated loyalty points, and more.

All of the above enables you to make smarter decisions, empowering you to run your dispensary more efficiently. Most cannabis POS systems have reporting capabilities that allow you track key metrics and have a handle on dispensary performance at all times.

Still, the role of your POS goes beyond simply ringing up sales. The right system keeps your operations running smoothly and helps you and your team make smarter business decisions.

Next steps: learning and getting the most out of your POS system

Now that you have a better understanding of how cannabis POS systems work, itโ€™s time to put that knowledge to good use! The next steps to take will depend on the current systems you have in place.

Make sure you have a solid POS in place

For starters, see to it that youโ€™re using a point of sale system that meets your needs. Consider your existing processesโ€”including the checkout experience, inventory management and reportingโ€”and find a cannabis POS solution that supports your dispensary's unique workflows.

You should also think about your back-of-house and operations. Do you have all the information you need to make informed decisions when it comes to inventory and sales? Are you able to integrate the different moving parts of your business?

The answers to these questions will shed light on the capabilities you need in a point of sale system, so you can find the best solution for you.

Train your team

Already have a cannabis POS system you love? Ensure you and your team fully understand its capabilities so you can put the system into good use. Here are some tips on how to do just that.

Get training and support from your POS vendor.

See if your point of sale provider offers training sessions to help you and your team learn the system. These sessions are particularly useful when youโ€™re starting out with the POS system, as theyโ€™ll help get familiar with its features and how they apply to your specific business.

Dutchie, for example, offers premium onboarding, account management and other services to help you get the most out of the software. We also also provide support 7 days a week, so you can get in touch with us when it matters.

Tap into your providerโ€™s resources.

Most POS companies provide support articles, step-by-step guides and other resources to help you learn the solutionโ€™s features and capabilities. If you prefer to peruse information at your own pace, then keep these documents handy so you can reference them when needed.

Keep your updated with new features and developments.

POS solution providers regularly put out new features and releases to improve the performance of the system. Keep an eye out for these updates. That way, when a useful feature comes out, youโ€™ll be able to take advantage of it ASAP.

The bottom line

Whether youโ€™re new to how POS systems work or you already have something in place but want to find a better solution, Dutchieโ€™s here to help.

Dutchie is the leading technology partner for cannabis retailers of all sizes. With a range of solutions covering point of sale, payments, ecommerce, insurance, and more, Dutchie empowers dispensaries to run efficiently, scale their operation easily, stay compliant, and offer outstanding experiences to the customers who rely on them.

Request a demo today.