You Have Options for Funding POS as a Service

The thought of self-funding and limiting cash flow or borrowing and amassing debt may be enough to prevent you from selling as a Service solutions all together. But there is another option.

One of the biggest drivers of Point of Sale as a Service (POSaaS) is that merchants don’t have to make an upfront investment in the system. POSaaS bundles everything the merchant needs into one package – POS hardware, software, installation, and services – for one budget-friendly monthly fee.

So, for retailers or restaurateurs operating on thin margins in competitive industries, POSaaService offers a practical way to upgrade their point of sale (POS) systems – and to get the expenditure approved by the CFO.

Many companies don’t want to take the risk that the system they buy will be outdated in a few years if regulatory requirements or new tech forces a change. POS as a Service allows them to completely revamp the system in a few years.

But is POSaaS Easy for VARs and MSPs?

Although POS as a Service gives merchants a budget-friendly option, it can create a new challenge for solutions providers: How do you fund the system if the customer isn’t paying upfront?

The thought of self-funding and limiting cash flow or borrowing and amassing debt may be enough to prevent you from selling as a Service solutions altogether. But other options exist, such as working with a financial services company.

Funding POS as a Service through a Financial Services Company

Several financial services companies offer programs designed specifically for IT solutions providers offering solutions as a Service.

For example, after a VAR or MSP brings an opportunity to the financial services company, it may contract with the end user directly, packaging all of the elements of the solution into single monthly payments over a defined term, usually of 24 or 36 months.

The financial services company funds the POS terminals, peripherals, software, and additional solutions or services, such as encryption and kitting, and pays the solution provider upfront. If Software as a Service is included, the financial services company may pay the vendor monthly and remit residuals to the VAR or MSP, creating a recurring revenue stream.

It’s also possible to have a private label program where it appears that the MSP or VAR, not the financial services company, is collecting the monthly subscription fee from the client.

One of the most significant advantages of working with a financial services company to provide POS as a Service is the dramatic reduction in risk to the VAR or MSP; the financial services company assumes the risk. It’s a particularly significant advantage when a restaurant or retail chain is looking to replace all of their POS equipment, the deal size can get very large very quickly – maybe $1 million or more.

How an as a Service Program Differs from a Lease

Although there are similarities between an as a Service program and a traditional POS hardware lease, and the terms may be used interchangeably, there are several differences:

  • As a Service includes other costs: Besides hardware, it covers software and services. Hardware is often less than half of the total transaction.
  • Shorter term: The programs are shorter to accommodate merchants’ need for flexibility regarding their IT systems. As a Service dramatically shortens the refresh cycle, which can mean more revenue for the solutions provider.
  • It provides upfront and recurring revenue: Because cloud solutions are billed differently, you will receive lump-sum funding to cover hardware purchases and recurring revenue from monthly billing.
  • It’s often more flexible: Your financial services partners may give you more options for continuing or changing terms at the end of a contract.

Funding Your POSaaS Business is Possible

VARs and MSPs can form beneficial partnerships with financial services companies if they do their due diligence. Ensure you are partnering with financial services companies that are experienced, financially stable and will hold the program internally, not sell it off. You also need to ensure that the company has the flexibility to fund all elements of the solutions you provide.

Educate yourself about available options for funding POS as a Service so that you can offer this option to your customers and prospects, giving them a financially feasible way to upgrade to the necessary technology, even during uncertain economic times, but without putting your own business at risk.

Mike Monocello

The former owner of a software development company and having more than a decade of experience writing for B2B IT solution providers, Mike is co-founder of Managed Services Journal (formerly XaaS Journal) and DevPro Journal.