Are POS Transactions the Greatest Threat to Finances of Retail Businesses?


The quick answer to this question is a resounding Yes and No! Yes, if you belong to the retail business sector that grapple daily, with the nightmares of transaction failures and unending chargebacks by banks; and No, if you belong to the banking sector or other E-payment organizations involved in the POS management chain. However, our research and experience show that POS transactions could hurt retail business organizations if they do not know how to effectively manage the process to provide revenue assurance for their organizations

Reagan Home & Kitchen-Uyo,Akwa Ibom State

Reagan Home & Kitchen-Uyo,Akwa Ibom State

In business today, using POS (Point of Sales) systems to receive payments from customers is an innovative must, yet POS represents the greatest threat to the collection of sales proceeds by retailer business owners. If you own, operate or manage a school, hospital, hotel, supermarket, mall, neighbourhood shop or any type of small and medium business that deals directly with the public, chances are that you will use POS devices or other electronic payment media to receive payments. Retail businesses use POS machines the most, for the purpose of receiving money arising from sales transactions.

A POS (Point of Sale) terminal is an electronic device used to process card payments by business organizations. A POS terminal generally does the following:

• Reads the information on a customer’s credit or debit card
• Checks if the funds in a customer’s bank account are sufficient to pay for the transaction in question
• Transfers the transaction amount from the customer’s account to the seller’s account (or at least, accounts for the transfer with the credit card network e.g. Interswitch)
• Records the transaction and prints a receipt(POS machines actually print two receipts during a transaction process: one receipt for the customer as evidence of payment and one for the merchant, for reconciliation and control purposes)

For many businesses, managing POS transactions is a herculean task. Understand that failure to effectively and efficiently manage your POS transactions pipeline is an open invitation to disaster and a serious threat to your retail business, particularly as retail businesses today maintain nearly 50-50 cash-to-card ratio in daily transactions.Your ability to verify, confirm, reconcile and prove (through your accounting and financial control practices), that payments made by customers during sales transactions actually find their way into your bank account, is a task that must be carried out on a daily basis, to ensure that your revenue is assured and that you do not lose money unnecessarily.

POS Issues and How They May Threaten Your Retail Business

All POS transaction issues arise from Hardware, Software, Connectivity and/or User Issue scenarios.

POS hardware include the POS device itself, a cash register (comprised of a computer, monitor, cash drawer, receipt printer, customer display pole or screen, barcode scanner) and a debit/credit card reader while POS Software is essentially the solution behind the device’s functionality.

Most hardware and software related issues will be resolved by the POS solutions providers’ maintenance staff who visit regularly in most retail locations. Connectivity issues depend on the state and effectiveness of the telecommunication networks. This article will address POS Connectivity and User Related Issues since these are the most prevalent POS issues and often, this is where your money will be lost.

Connectivity Issues

Connectivity Issues refer to connection and transmission related issues when carrying out POS transactions. When a customer presents his or her card for payment, the POS system must connect and transmit the card account information to the card processing network using either a dial-up modem or broadband Internet service. If the network connection becomes unavailable, the system will lose its ability to process the POS transaction and error reports like “Connection Loss”, “Wave Loss” , “Transaction Rejected”, “Issuing Bank Not Available”, “Transaction Declined “and “SSL Connect Failure” etc will be generated across the device’s screen. A print out may or may not be generated to evidence the status of this transaction and the customer may or may not be charged. If the customer is charged, the POS transaction may or may not be reversed immediately; it all depends on the telecommunications networks. Note that most Declined Transactions are always evidenced by auto generated printouts, most others are not.

How Connectivity May Affect Your Account

Connectivity Issues are usually a bit difficult to track because most times, POS devices do not issue print outs regarding the success or failure of such transactions (your sales assistant or cashier must just attentively focus on the device’s screen to capture whatever error message the system throws up). The negative implication of this is the strained relationship a failed POS transaction will create between you and your customer especially if that transaction value was the last amount in your customer’s account and the customer is charged but not given value by way of goods because the transaction was unsuccessful.

  • Solution:
     Use a POS solution that will give you real time or near real time view of POS transactions as they occur
     Train your employees extensively on how to operate the POS system in performing POS transactions
     Increase your pay points to reduce queues and pressure on your sales staff
     Maintain minimum of 2 POS machines from two different providers with different telecommunication networks. You may deploy more depending on your size

User Related Issues
This has to do with your Sales Assistants, Cashiers and/or your customers not using the POS device correctly when carrying out Pos transactions. For example, the cashier overcharging the customer when inputting transaction value or the customer typing the wrong pin or the wrong account (Current or Savings Account) linked to the ATM card used for the card transaction.

User issues from the customer end will generate error messages like “Pin Blocked”, “Contact Your Bank”, “Insufficient Funds” etc. Poorly trained and careless cashiers may overcharge customers when typing the transaction amount, or may touch, shift or hurriedly remove the ATM card when the POS system appears slow to connect. This usually results in customers being charged wrongly since the transaction would not have been successfully concluded at this stage. Usually, there will be no print-out for this transaction except, maybe a debit alert from the customer’s.

How User Issues May Affect Your Retail Business
On the customer facing side, user related POS issues won’t usually be a problem since the customer will just have to either fund his/her account or resolve Pin Block issues(whichever is applicable) with his/her bank. However, user issues created by careless sales staff will definitely be a problem that may negatively affect your business. For example, if a customer is wrongly charged without value being given, you may lose the confidence of that customer or lose your goods in exchange for a transaction that clearly was not successful. If you chose to keep the customer, you may lose your goods and if you chose to keep your goods, you may lose the customer. You have to choose the risk to run in this case.

  • Solution:
     Give your sales employees extensive training on how to perform POS transactions and the risk factors involved in poorly executed POS transactions
     Increase your sales pay points to reduce queues and pressure on your cashiers
     Maintain minimum of 2 POS machines from two different providers with different telecommunication networks
     Use a solution that will give you real time or near real time view of POS transactions as they occur not the so-called POS Viewer that resolves transactions after 24 hours

How to Manage POS Transactions

Failed POS transactions are every retailer’s nightmare. They hurt your funds, customers and business. Every failed POS Transaction leads to the initiation of a chargeback process and a “Not on Us” claim. In order to avoid unexpected and potentially irrecoverable “Not on Us” claims and charges, it is very important that you institute a sound POS Management System in your retail organization. The essence of a sound POS Management system is to ensure that:
• All payments made by customers are duly received and accounted for, in your bank account
• All failed POS transactions and chargebacks are appropriately traced, documented and accounted for, to avoid losses to your organization.

Steps to Effective POS Transaction Management

To effectively manage your POS transactions and ensure concrete revenue assurance in your business, you must implement:

  • Monitoring and Verification Processes

Monitoring and verification is the first step towards the process of ensuring that daily sales proceeds from POS transactions are accurately documented and accounted for, at the end of each business day and/or the next business day(in countries where POS transactions resolve into merchants’ accounts the next business day). In Nigeria for example, weekdays POS transactions spanning Mondays-Thursdays), resolve into merchant accounts 24hours (minimum) after conclusion of each day’s transaction and 72hours or so for weekend transactions; that is POS transactions carried out from Friday-Sunday will appear in your bank account on Monday afternoon (1pm-5pm) or on Tuesday following that weekend at about the same time(1pm-5pm).

In monitoring your POS transactions, you must ensure that:

• All Sales receipts/tickets from your Sales Management Solution e.g. Omega or Metropos, are printed in duplicates by your sales staff

• All tickets/receipts from the POS device are also printed in duplicates

• Each Sales ticket and its corresponding POS receipt is stapled or pinned to each other as evidence of these transactions

• Stapled Transaction & POS tickets are handed over to your accounts personnel in charge of this function at the end of each day or each shift( depending on your organization’s work schedule)

• Accounts officers in charge of POS Account transaction runs End of Day (EoD) on the day’s transaction, checks the backend transaction balances of each sales staff and confirms if POS transaction totals captured in the system agrees with the sum of tickets submitted by each sales staff. This can be done by opening a ruled datasheet for each cashier and each bank(if you have more than one bank)

• Account’s personnel sums each cashier’s POS tickets per bank and also sums the global figures (all banks); then compares the global figures evidenced by tickets against global figures against your system POS Sales totals. If there is a discrepancy, the sales staff concerned must be notified, called in for explanation and if necessary, queried.

• Accounts officer then obtains daily Transaction Viewer Reports from your bank and ticks the report against each POS ticket. The Daily POS Viewer Report shows complete details of each transaction as it occurred in your organization the previous day, as against the bulk figures that your bank will eventually credit into your account.

• Discrepancies (if any) will often times be identified at this stage. If discrepancies are discovered, reach out to your bank account officer immediately for quick resolution. Note that you must have an email account linked to your bank account before you can get the Daily POS Viewer Report from your bank.

  • Dispute and Chargeback Management System

A chargeback is a transaction reversal that occurs when there is a failed POS transaction between a Merchant and her Customer. Some banks call it “Not on Us Claim”. A Chargeback serves as a form of protection for the customer and merchant against fraudulent or unintended loss of money resulting from a failed POS transaction.
When a POS payment is made, some of those transactions usually fail. POS transaction failure means your customer or client may have been charged but the primary input device e.g. POS machines indicates that that transaction is not successful for some reason e.g. “Transaction Declined”, “Wave Loss”, “Signal Loss”, “Issuing Bank Not Available”, “SSL Connection Failure” etc. When this failure occurs, the customer may or may not be charged. Where the customer is charged, the POS Management Pipeline/system may automatically reverse the charge or it may not. If it automatically reverses the transaction, then the customer gets his money back but if it’s not reversed, then this will give rise to a chargeback claim.

The customer will have to visit his bank to file a claim against the merchant here. Once the claim is filed, the merchant is liable to refund the transaction value to the customer, via the customer’s bank or he stands the risk of losing both his money and the goods bought by the customer, where he cannot provide compelling evidence proving otherwise. This is because the process of refunding the chargeback funds to the customer is automated and time-bound; meaning that if the merchant fails to respond with acceptable evidence within the specified timeline, the transaction was successful and the financial system managing POS transactions will automatically charge the merchant for that transaction. This is where most retail organizations lose their money. This is why you must safeguard your funds.

How to Resolve Charge Back Issues
Cardholders will always file disputes with their issuing bank where there are cases of wrong POS charges. These banks are often called “issuers”. When a dispute is filed, the acquirer (merchant’s bank) will debit the transaction amount from the merchant’s account. The merchant will then need to gather compelling evidence to show that the transaction was “Approved and Successful or Unsuccessful” .The funds will return to the merchant if the evidence favors an overturn of the cardholder’s dispute.

Since Chargbacks are time-bound transactions, the first way to ensure you promptly respond to charge back issues from your banks is to open an email account and ask your bank to link that email account to your bank account. This is the way banks contact you in cases of Chargeback claims. Ensure also, you link your email account to your mobile device (where necessary) to ensure you receive and respond to these claim emails promptly. If you fail to do this, your money will be taken after the statutory 48-72hours timeline.

To resolve Chargeback Issues:
• Check your email every hour of every week day(most claims will come during weekdays only)
• Ask your account personnel responsible for POS transactions to fetch out the ticket in dispute. Where there is no ticket (this happens often), ask for the EoD printout from your POS device
• Reconfirm that the transaction value actually dropped into your account by checking your Daily POS Viewer Report
• Take picture of the POS Ticket, attach the ticket as evidence to your response email and send to your bank. Always use the “Reply to All” Option in responding to chargeback emails. This will ensure all parties earlier copied in the transaction email see your response
• Note this transaction and look out for it when you collect your bank statement for that month. This will ensure you are not wrongly charged after you must have responded to the transaction within the specified time frame.

Scarce funds, lost in trickles eventually become huge and can potentially harm your business. Ensure you provide revenue assurance to your retail business by ensuring all monies earned during sales transactions are properly accounted for. Do not allow losses except where such loss is legitimate. Remember banking transactions are carried out by human beings who can make mistakes or robots that can malfunction or wrongly programmed. Be wise and pay attention to all your financial details. It is worth all the effort.

Having Issues with managing or strengthening key aspects of your existing business? Come talk to us! Send us an email here or call us on +234 80 561 78895 or +234 81 8170 1100. Also follow us on Facebook @SteepleGlobalServices or our Twitter handle @steepleglobal or Instagram@Steepleglobalservices and let’s discuss ideas and help you begin your journey towards financial freedom!

Steeple Global Services( ) is a business consulting firm based in Uyo, Akwa Ibom State, Nigeria. We help to bring your business idea into reality, set up your new business for you and/or help to turn around your ailing or struggling business(s) into profit making ventures. We help businesses grow!!