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What is a Business Phone System? And How It Works

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  • Business phone systems have become an essential tool for organizations of all sizes. A business phone system enables companies to manage their communications more efficiently, which in turn can lead to improved customer service, increased productivity, and reduced costs.
  • In this article, we will provide an overview of what a business phone system is, how it works, and the various types of phone systems available.
  • We will also discuss the key features to consider when selecting a business phone system, and the benefits that it can offer to organizations of all sizes.
  • Whether you're a small business owner or part of a larger organization, this article will provide valuable insights into the world of business phone systems and help you make an informed decision when selecting a phone system for your business

Table Of Contents:

What is a business phone system?

Different types of business phone systems and how they work

Things to consider when choosing a phone system

Try the TeleCMI VoIP phone system

Frequently asked questions

What is a business phone system?

  • A business phone system is a communication system designed specifically for use in a business environment. It allows employees to make and receive phone calls both internally within the organization and externally with customers, clients, and suppliers.
  • Business phone systems can range from basic landline systems to more advanced VoIP systems (cloud PBX) that utilize the internet to transmit voice calls.
  • They often include features such as call forwarding, voicemail, conferencing, automated attendant, and call routing, among others.
  • The purpose of a business phone system is to provide a reliable and efficient means of communication within a business organization. It allows employees to communicate with each other and with customers or clients easily and efficiently, which can improve customer service and increase productivity.

Different types of phone systems and how they work

PBX phone system

  • PBX, or Private Branch Exchange, is a type of telephone system used in organizations to manage incoming and outgoing phone calls. It enables users to make and receive calls within the organization and to the outside world through a single phone number or a set of phone numbers.
  • Unlike cloud PBX, they were completely hardware-based and consisted of a switchboard with physical wires and connections.
  • It works by creating an internal phone network within the organization, connecting all the phone lines and extensions to a central switchboard.
  • The switchboard is responsible for routing incoming calls to the appropriate extension or department and forwarding outgoing calls to the external phone network.
Key system units (KSU)
  • KSU stands for Key System Unit, which is a type of telephone system used in small to medium-sized organizations.
  • KSU works by providing a central control unit that connects multiple phone lines and extensions, allowing users to make and receive calls within the organization and to the outside world.
  • While KSU systems may have been a suitable option for small businesses in the past, they have several limitations compared to more modern phone systems.
  • The disadvantages of KSU systems include limited scalability as they accommodate only 50 phone lines or lesser, require an in-house technician to maintain and repair the system, and have limited flexibility as they are hardwired and you can’t easily move or reconfigure phone lines without rewiring the system.
VoIP phone system
  • VoIP is a modern phone system that works on the cloud, meaning you don’t need to install and maintain expensive telephone hardware on your premises like PBX and KSU phone systems.
  • VoIP phone system is usually accessible via mobile, desktop, and web apps and can also be implemented with desk phones and IP phones.
  • VoIP allows users to make and receive phone calls over the internet using a softphone. Unlike traditional phone systems that use physical wires and connections, VoIP uses digital data packets to transmit voice communication.
  • It works by converting analog audio signals into digital data packets and transmitting them over the internet. The digital data packets are then received by the recipient's phone and converted back into analog audio signals.
Things to consider when choosing a phone system
Voice Over Internet Protocol (VoIP)
  • When choosing a business phone system, considering VoIP can be beneficial for several reasons. Here are some benefits of VoIP,
  • Cost savings: VoIP allows you to make calls over the internet, which can be significantly cheaper than traditional phone systems.
  • With VoIP, you can make and receive calls from anywhere with an internet connection, which can be particularly useful for businesses with remote or mobile workers.
  • VoIP offers a range of advanced features, such as voicemail-to-email, virtual numbers, video conferencing, and more, which can help improve productivity and streamline communication.


  • When purchasing a phone system, look for features your business need such as intercom, user extensions, call recording, call conferencing, toll-free numbers, IVR, auto attendant, call routing, call analytics, admin and user apps, and so on.

Call quality

  • Poor call quality can lead to frustration for both employees and customers, and can negatively impact business operations. Hence, it’s vital to check for call connectivity issues, call echoes, network stability, and platform reliability before committing.


  • Uptime refers to the amount of time that your phone system is operational and available to users. Downtime can be costly for businesses, resulting in lost productivity, missed opportunities, and frustrated customers.
  • So it's important to check the below metrics with your virtual phone system provider.
  • Redundancy: A good business phone system will have redundancy built-in, meaning that there are backup systems and failover mechanisms in place to ensure that the system stays up even in the event of an outage or failure.
  • Service level agreements (SLAs): Look for a provider that offers a strong SLA, which specifies the level of uptime that they guarantee.
  • Provider track record: Look for reviews and customer feedback to get a sense of how reliable their service is.
  • Maintenance and updates: Make sure the provider you choose offers regular maintenance and updates as part of their service.
  • Disaster recovery: Look for a provider that has a disaster recovery plan in place, which can help ensure that your system stays up in the event of a natural disaster, cyberattack, or other disruptive events.

Multichannel capability

  • Multi-channel communication refers to the ability to communicate with customers and clients through multiple channels, such as phone, email, chat, and social media. If your business requires other communication mediums apart from voice calls, consider this feature also known as UCaaS (Unified communications as a service).


  • Look for a provider that offers transparent pricing options with clear information about what is included in each plan. Make sure the pricing aligns with your budget and business needs.
  • Beware of hidden charges and add-ons such as activation fees, termination fees, and paying for additional features such as call recording and transcription or long-term contract requirements. Read the terms and conditions carefully to avoid surprises.


  • Look for a phone system that offers mobile, desktop, or web-based apps for employees to use on their smartphones or tablets. Mobile apps can provide added flexibility for employees who work remotely or need to stay connected while on the go.
  • By considering apps and accessibility when choosing a business phone system, you can ensure that your employees have the tools they need to stay connected and productive while locating from anywhere.
  • Apart from these, also look for integration options with CRM and other software tools and number porting facility.

Try The TeleCMI VoIP Phone System

  • Adopt a TeleCMI feature-rich VoIP phone system and save more on your communication charges. Try today with a free trial or book a demo.

Frequently asked questions


Ultimately, the right business phone system for your business will depend on your specific needs, business size, features you need, budget, and growth plans. However, VoIP or cloud phone systems can be the right fit for small businesses and corporates than old phone systems. VoIP gives you the flexibility to communicate from anywhere and scale up or down when needed and more importantly, it’s cost-effective.


The business phone system setup process involves determining your business needs, choosing a phone system provider, installing and configuring the system, training employees, testing the system, and launching it for your business.


A virtual phone number is a telephone number that is not tied to a specific physical line or location. It can be used to make and receive calls via the internet, allowing businesses to have a local presence in multiple locations without needing to have a physical presence there.

Virtual phone numbers are typically provided by cloud-based phone system providers like TeleCMI and can be used with a variety of devices, including smartphones and computers.


Traditional PBX phone systems can cost anywhere from $1,000 to $5,000 per user for hardware and installation.

Cloud-based phone systems or VoIP like TeleCMI can cost anywhere from $20 to $50 per user per month for basic plans, with more advanced plans costing upwards of $100 per user per month.

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