How to Interpret and Learn From POS Sales Reports

What is a POS sales report?

In addition to ringing up sales for your store or restaurant, POS systems store data that can help inform key business decisions. Every time you ring up a sale or enter inventory into a POS system, data is collected and analyzed. Business owners can run reports daily, monthly, quarterly and annually to analyze that data.

Through these POS reports, business owners get actionable information on sales trends, employee performance and inventory management. This knowledge can give you an overview of the entire business or a snapshot of specific areas. Businesses on a tight budget can use these reports to improve their inventory management processes, for example, reducing waste, supporting cash flow, and improving profit margins.

If you’re working with a cloud-based POS vendor, you get the added benefit of accessing reports on demand and on the go. You don’t have to be at your store or restaurant to run POS sales reports because everything resides in the cloud. This is especially useful for sole proprietors or entrepreneurs running a side hustle where they’re frequently attending events or job sites and not always sitting at a desk.

Types of POS system sales reports

Here are three critical POS sales reports you should plan to run regularly.

• Sales summary: A sales summary provides a business performance overview. It gives you a look at your sales at a specific point in time, such as sales for the end of the night, week, month or year. A comprehensive POS sales report shows the cost of goods sold, your gross profits, your profit margin, and the taxes on your sales.
• Sales-per-product report: For more detailed sales data, run reports based on product type. Sales-per-product reports help you identify which products are doing well and which are languishing on store shelves. These reports can also help you identify trends and seasonality to inform inventory ordering. For new businesses figuring out the demands of their customer base or small businesses struggling financially, these supports can be instrumental.
• Sales-per-customer report: It’s essential to ensure your business resonates with customers. To do that, run customer-level sales reports, which help you spot your best and worst customers or customer groups. Armed with this knowledge, which is especially easy to generate in CRM-enabled POS systems, you can tailor your marketing and outreach efforts. If you’ve struggled to engage your target audience or get the brand visibility you need in a specific market, this report could be helpful for your business.

How do you interpret POS sales reports?

Consider the following four elements of effective POS sales report interpretation:

1. Decide what data you want to glean from the POS sales report.

The first step is to decide what you want to learn from the POS sales report data. Ask the following questions: 

• Do you want to know whether you should reorder a specific product? 
• Do you want to know if the promotion you ran last week was successful? 
• Do you want to know which employee routinely has the highest sales volume?
• Do you want to know which customers are buying specific products?

The right questions help you focus on the data you need. They also help you understand what’s happening with your business so you can make more informed decisions.

2. Gather and measure the POS sales data.

Next, you must decide on the POS sales report that can provide the knowledge you want. You may need to filter your report by criteria such as date ranges to find the right data set. Multiple reports or filters may allow you to look at the data from different angles, augment it with additional details, or isolate it from other variables.

Next, examine the data you glean from POS reports over time. For example, compare your current data to the data from the previous day, week, month and year. This analysis helps you determine your sales averages and gives you a benchmark against which to measure current numbers.

Jim Barksdale, former president and CEO of Netscape, said, “You cannot manage that which you cannot measure.” If you don’t measure your data by comparing it against historical numbers, you won’t be able to identify abnormalities that indicate that something good or bad is happening with your sales.

3. Look for patterns and trends in your POS sales reports.

Next, look for data patterns to gain insight into your customers’ buying habits. POS reports can reveal the following: 

• Successful promotions: You may learn whether your latest promotion brought in more customers than usual or contributed to a higher sales volume in an ordinarily flat time. This information can help you plan and decide whether to increase, decrease or hold steady on reorder quantities, promotional efforts or other activities.
• Seasonal trends: Say an item that was hot three months ago is now one of your worst-selling products. Sales data may reveal that it’s a seasonal item and your low sales numbers are consistent for this time of the year. You might decide to remove the product for now and order more when it’s in season again.
• Cross-selling opportunities: Data patterns can help you identify opportunities for cross-selling. If you discover that customers tend to purchase specific items together, you can make it easier to find related items by displaying them together, offering them as a bundle or asking customers if they’re interested in the related item when they place their order or check out. 

4. Apply context to your POS sales report data.

You must apply context to interpret data trends and learn from your sales reports. Context includes information beyond the statistics that explains why customers buy (or don’t buy) specific items. Here are some examples of context that can inform your sales report data: 

• Seasonal factors, including weather changes 
• Road construction
• Competitors’ actions
• Supplier activities 
• Changes in the number of employees
• Addition or removal of products or services
• Promotions 
• Price increases

Bringing context to your POS sales reports helps you understand the story behind the numbers so you can interpret what’s really going on with your sales. Contextual factors can explain sudden upticks, sales drops and other anomalies and inform your responses.

Example of interpreting a POS report with context

Say you have a children’s clothing store and suddenly sell out of the little white gloves you usually sell just a few pairs of in the spring and winter. However, you learn that a local dance class is using these gloves as part of a costume for an upcoming performance. This information explains the demand.

If you didn’t know the context of this increased demand, you might assume it’s a trend and order a massive quantity of these items. Then, because it was a one-time occurrence, you’d be left with excess inventory you’d have to sit on or deeply discount to move. However, considering the context, you realize it’s a one-time occurrence and can restock at the same levels as before.

Context is especially critical for local, independent businesses — and in fact, could be a distinct advantage. Businesses that are embedded in a local community can better understand their customers’ needs than a national chain. By tailoring offerings to suit those needs, these businesses can drive a level of customer loyalty and repeat business that big brands simply cannot.

What are the benefits of generating sales reports?

Sales reports can be basic or detailed, depending on the information you want. Here are three benefits of generating and analyzing sales reports:

• Sales reports help you make smarter purchasing decisions. You can’t afford to be out of your hot items and stuck with a glut of slow-selling products. POS sales reports support effective inventory management by updating items in real time as they’re purchased. You can identify which products are doing well, which aren’t and where you need to restock.
• Sales reports help you target the right customers for sales and promotions. The last thing you want is to run a sale or promotion and have nobody show up. POS sales reports can help you see what discounts and deals customers have responded to in the past and which customer segments are receptive to your promotions so you can focus your efforts on promising customers.
• Sales reports help you compare sales from several stores. If you have multiple business locations, staying on top of sales can be challenging. A robust POS system with advanced reporting features can help you track and compare sales across multiple stores. This information can help you determine if you need to raise or cut prices in one location, put more staff on the sales floor of another, or spend extra cash marketing in a particular area.

Don’t just run POS reports — learn from them

When you interpret your POS sales reports correctly, you learn valuable information about your business. As you get more familiar with your data and POS system, the process will get easier. You’ll be able to ask more in-depth questions about your sales numbers, product mix, employee performance and customer behavior. 

The more often you run POS reports, the better you’ll understand which reports and filters will lead you to the answers you need. You’ll also become familiar with the patterns you should look for in your data, put the data into context and consider how various factors contribute to the story your sales figures tell you. That way, you can make smart decisions that help your business prosper.

Max Freedman and Donna Fuscaldo contributed to this article.