How Does Square Work
Square has become one of the most popular mobile point-of-sale companies in the nation over the past decade, offering a wide range of quality software and hardware products for businesses of all shapes and sizes.
With more than two million active sellers on the app today, it's clear that Square is doing something right.
You're here because you're probably wondering,
How does Square work for small business owners like me?
Today, we're going to explore the ins and outs of how Square works so you can start making better business decisions using a top-tier POS system.
How Square Works
Square was one of the first mobile payment processing apps that came with a physical card reader.
When it first came about in 2009, many business owners were eager to adopt it because it allowed them to accept credit card payments from anywhere, any time, rather than having to rely solely on cash transactions.
Square also got rid of complex, long-term contracts that several similar merchant services required, making it easy for any business owner to hop on and start using Square's service immediately.
Square uses flat-rate payment processing for credit card payments, ACH transfers, and contactless payments. You'll also find a wide range of quality products within the Square ecosystem, which you can bundle together to craft full-fledged POS systems.
Of course, you can also choose to use singular solutions on their own, such as Square Payroll.
Let's dive in and take a closer look at some of the most important Square offerings.
Benefits of Using Square
Flat-Rate Payment Processing
Whether you run a brick-and-mortar store, an eCommerce store, or an on-the-go business, Square can help you complete all of your credit card transactions with ease, thanks to its flat-rate processing.
No matter what type of credit card you are processing, you'll pay the same rate, meaning you never have to deal with the surprise of ultra-high fees.
The main benefit of Square's pricing model is its simplicity. Knowing how much you'll have to pay in advance allows you to keep better track of your financing.
Affordable POS Software
Beyond its flat-rate processing and top-notch merchant services, Square has a free POS app that you can download and install onto your iOS or Android devices.
All you need is one of the proprietary hardware products Square offers.
Business owners praise the free Square app for its user-friendliness and offline functionality, which makes it usable for in-store and on-the-go transactions.
Beyond the free app, Square has several POS software plans (both free and paid) for numerous types of businesses, including restaurants and retail stores. Even if you run a unique appointment-based business, you'll be able to find Square software that works for you.
You'll find standard POS features in every Square point-of-sale plan, including employee management, inventory management, customer relationship management, and reporting. Depending on the type of software you choose, you'll also find plenty of industry-specific features.
If you run a restaurant, for example, you can use the Square for Restaurants, which has a kitchen display system peripheral that provides detailed tickets, let's, and timers, for all of the stations in your restaurant.
On the other hand, if you run a retail shop, you get access to a barcode-based UI to track inventory and manage in-store or online orders.
Website Builder
If that wasn't enough, Square also comes with a free, user-friendly website builder that you can use to create a functional eCommerce website if you don't already have one. You can then use this site to add unique eCommerce functionalities to your business, such as online ordering or appointment booking.
You don't need to be a web designer to use the site builder effectively either, as Square provides a myriad of templates for restaurant, retail, event, and appointment-based businesses.
When you set your website up, it will automatically sync inventory, orders, and customer data with your Square POS. Using your online store for shipping, local delivery, or curbside pickup is just another way to attract more customers.
Square Financial Services
Square also offers businesses a wide range of management solutions to help its customers keep track of their finances. You can use these management solutions in conjunction with your Square products or in standalone.
The ability to mix and match Square's various solutions based on your needs is one of the things that makes this company so effective.
Square Payroll is a popular Square offering, allowing you to keep track of your employees' time, pay employees, file tax forms, or manage benefits.
If you sign up as a Square seller, you can take advantage of Square Capital, wherein Square offers business owners loans with a $100,000 cap. They don't perform a hard credit check, like many large lenders and the approval is ultra-fast.
Square Banking
Recently, Square took a step forward with its services to offer Square Banking. Of course, Square isn't a bank but a financial services company. However, it has banking affiliates, such as Sutton Bank, that it uses to provide these kinds of services.
Through this banking service, Square offers small business loans and checking and savings accounts. You can let deposit all of the income you receive through your Square POS into your Square account, making it much easier to access your funds for your business.
Square Banking has a number of notable benefits, including:
For small businesses, using Square Banking probably seems like a no-brainer. Plus, if you open a savings account through Square, you can earn 0.5% APY.
Square also offers debit cards, similar to other banks. With Square Capital, you can make automated payments to pay off your business loans.
Square Hardware
Though Square started off as a company offering simply card readers to accept payments from a mobile device, it has expanded into a company that offers full-fledged hardware to cover all of the bases of a POS system.
Businesses that need a one-stop shop for point-of-sale functionality often look to the Register.
The beauty of this piece of hardware is that it has total POS functionality with a customer-facing display.
However, if you're content with using your iPad for your business transactions, you can use the Square Stand and turn it into a countertop POS location. Square is also compatible with a number of other tablets.
The Square Terminal is another popular option that allows you to accept payments and print receipts for customers.
The sheer number of accessories that Square offers is one of the reasons it has risen so far in the POS industry. From receipt printers to barcode readers to cash drawers to scales, you can find peripherals for just about any kind of business.
Selling With Square
Now, as we mentioned before, one of the biggest reasons Square users continue to sell with Square is that the company makes it easy for them to accept payments from wherever they are. For example, if you run a part-time business selling your homemade salsa at the farmer's market, you can use Square's service to turn your smartphone into a functional cash register.
Rather than having to accept cash, you can accept credit card payments and deposit funds from your transactions directly into your bank account.
You can start by downloading the Square Register app on your smart device and signing up for the service through Square's website. Square will then send you their card reading device, which you can plug into the headphone jack of your chosen device to accept payments.
Once you have your reader, you'll have to go to your free account and enter your banking information so Square can directly deposit your funds. Most of the payments that go through Square only take two days to make it to your account, giving you access to your funds when you need them most.
While the exact process of setting Square up and making transactions will depend on the type of Square system you are using, the process is very simple overall. The intuitiveness of the company's software and hardware options is what makes it so popular for small business owners.
Square Register
Square Register isn't your typical convenient transaction service. It's more of a point-of-sale terminal that you'd find at your favorite clothing store or cafe. However, the main difference is that those kinds of POS systems can often cost thousands of dollars.
Square's Register differs from these other major POS providers in that it's relatively affordable, yet it still allows you to organize your products, keep track of your inventory, and make sales with ease.
How Does Square Make Money?
So, you might be wondering,
How does a Square Reader work to make money for Square?
Well, the service isn't totally free.
Square charges a 2.75% fee for each in-person transaction. They also have flat-rate monthly fees, which vary. We highly recommend going with the percentage fee if you run a smaller, low-volume business. However, if you are a large retailer that processes many transactions, you might be better off with the flat rate monthly fee.
It's also important to note that the transaction percentage is higher for credit card numbers that are keyed-in (3.5% + $0.15 per keyed-in transaction).
While Square's pricing might be a bit higher than other card processing options, you don't have to deal with any overhead costs. You already get the Square Reader for free when you sign up, which is all you truly need to get started.
Square won't even charge you a monthly fee, and you don't need to meet any monthly transaction minimums to continue using the service, which makes it a wonderful option for small businesses that are just getting their feet wet.
Different Square Offerings
Square POS
Square's POS plan is the company's standard POS system offering, allowing business owners and employees to track inventory, manage their customers, process sales, and get insight into their business data with reporting and analytics tools.
You can download this POS software on your iPhone, iPad, or Android device. If you want to invest in Square's proprietary hardware, you also have the option to do so.
We highly recommend this offering for small businesses and individuals that are on a budget.
Square for Retail
Square for Retail is one of the company's most popular retail store offerings. It uses a barcode-style interface, allowing retailers to track their inventories, manage orders, and ring up in-store transactions. However, Square for Retail goes beyond brick-and-mortar functionality, providing a suite of eCommerce tools for online orders and in-store pickup.
While you can use the free plan that Square offers, it's quite limited. We often recommend the Plus plan, as it comes with advanced team management, analytics, and inventory tracking.
Square for Restaurants
Whether you run a quick-service cafe or a fine-dining establishment with table service, Square for Restaurants can help you manage all of your FOH and BOH operations. You'll find features for online ordering, in-house ordering, floor plan design, menu management, and more.
You can even purchase kitchen display systems through Square to make your communication between FOH and BOH more efficient.
Like Square's Retail plan, you can also choose to go the free route with the Restaurants plan. However, the features are also quite limited. Upgrading to Square's Plus plan gives you more advanced team management and FOH tools.
Square Appointments
The Appointments software has many similarities to the standard POS software. However, the main difference is that it also provides full-fledged appointment management tools, allowing you or your employees to easily manage client bookings from a single interface.
This unique software also allows customers to book appointments online. You can also integrate payment text and email confirmations and integrate credit card processing to keep your clients' cards on file for future use.
Final Thoughts - Should You Use Square For Your Business?
Square continues to be one of the most popular flat-rate payment processor options for businesses that want to pay as they go. Every year, Square continues to enhance the set of features in its quality business software. These include unique solutions specifically designed for restaurants, retail shops, and appointment-based companies, such as hairstylists.
Beyond that, its banking, marketing, and payroll tools are relatively robust, which is great considering how affordable Square is. Overall, if you're looking for a solution to maintain and grow your business, Square is one of the best options.
Tyler Connaghan
Contributing Author
