Good bookkeeping is the foundation of a financially healthy business — and the most common source of preventable tax problems, audit exposure, and missed decisions. The questions below reflect what Utah small business owners ask us most often about managing their books. For foundational concepts, see our bookkeeping basics guide.
Getting Started
Do I really need bookkeeping software, or can I use a spreadsheet?
You can start with a spreadsheet for a very simple, low-transaction business in its first few months. But you will outgrow it quickly, and migrating from spreadsheets to accounting software later creates work and errors. The cost of QuickBooks Online Simple Start (~$30/month) is far less than the CPA cleanup cost of a year of spreadsheet bookkeeping.
Cloud accounting software gives you:
- Automatic bank feeds that import and categorize transactions
- Real-time financial reports (income statement, balance sheet)
- Shared access with your CPA without file transfers
- Audit trail for every transaction
- Integration with payroll, invoicing, and e-commerce platforms
Start with software. QuickBooks Online and Xero are the industry standards that CPAs can access directly. See our cloud software comparison for a side-by-side analysis.
What’s the difference between bookkeeping and accounting?
Bookkeeping is the systematic recording of financial transactions — categorizing every income and expense item, reconciling bank accounts, and maintaining an accurate general ledger. It is primarily a data entry and organization function.
Accounting is the interpretation and reporting of that data — preparing financial statements, analyzing trends, advising on tax strategy, and making forward-looking financial decisions. Your CPA uses your bookkeeping records as the raw material for accounting analysis.
Good bookkeeping produces reliable data. Without it, even the best CPA cannot produce accurate financial statements or tax returns.
Should I do my own bookkeeping or hire a bookkeeper?
For most Utah small businesses, the answer depends on transaction volume, complexity, and owner bandwidth:
- Under 100 transactions/month: Most owners can self-manage with cloud software and quarterly CPA review
- 100–500 transactions/month: Part-time bookkeeper or bookkeeping service makes sense
- 500+ transactions/month, multiple payroll runs, inventory: Full-service bookkeeping is generally more cost-effective than owner time
The hidden cost of owner-managed bookkeeping is opportunity cost — every hour you spend categorizing transactions is an hour not spent on client work, sales, or operations.
Cash vs. Accrual
What is the difference between cash basis and accrual accounting?
Cash basis: Revenue is recorded when cash is received; expenses are recorded when cash is paid. Simple, matches your bank account, and acceptable for most small businesses.
Accrual basis: Revenue is recorded when earned (invoice issued), regardless of when payment arrives. Expenses are recorded when incurred (bill received), regardless of when paid. Required for businesses above ~$30 million in gross receipts and for businesses with inventory; produces more accurate monthly financial statements.
Example: You invoice a client $10,000 in December; they pay in January.
- Cash basis: Revenue recorded in January
- Accrual basis: Revenue recorded in December
Which method should I use?
Most Utah small businesses under $30 million in revenue use cash basis because it is simpler, matches your bank statements, and is acceptable for tax purposes. If your business has significant inventory, large accounts receivable balances, or extended payment terms, accrual accounting produces more meaningful financial statements for management decisions.
Discuss the choice with your CPA before the first year-end — changing accounting methods later requires IRS approval.
Bank Reconciliation
What is bank reconciliation and why does it matter?
Bank reconciliation is the process of matching your accounting software records to your bank statements — confirming that every transaction in the bank is recorded in your books, and every transaction in your books appears in the bank.
It matters because:
- It catches errors (duplicate entries, missed transactions, wrong amounts)
- It catches fraud (unauthorized transactions, check tampering)
- It ensures your financial statements reflect reality
- Your tax return is based on your books — unreliable books mean an unreliable tax return
How often should I reconcile?
Monthly, without exception. Reconcile every bank account, credit card, loan account, and merchant account by the 10th of the following month. Annual reconciliation is not bookkeeping — it is cleanup, and it is expensive.
My books don’t match my bank statement — what do I do?
Common causes:
- Transactions recorded in the wrong period (timing difference)
- Duplicate entries
- Bank errors
- Missing transactions (cash expenses not recorded, direct debit not entered)
- Uncleared checks (written but not yet processed by the bank)
Work backward from the last reconciled balance. Do not proceed to the next month until the current month reconciles to zero. If you can’t find the discrepancy, your bookkeeper or CPA can typically locate it in 1–2 hours.
Chart of Accounts
What is a chart of accounts and how should I set mine up?
The chart of accounts (COA) is the master list of all categories your business uses to record transactions. It is organized into five sections: assets, liabilities, equity, revenue, and expenses.
Your COA should match your business — a contractor’s COA looks different from a restaurant’s. But every business needs at minimum:
- Bank accounts (one per business account)
- Accounts receivable
- Fixed assets
- Accounts payable
- Loans payable
- Owner equity / distributions
- Revenue by major category
- COGS / direct costs
- Major expense categories (rent, utilities, insurance, payroll, professional fees, etc.)
Can I add new accounts whenever I want?
Yes, but think before you add. An overly detailed COA with hundreds of sub-accounts makes reports harder to read and categories harder to maintain. Consolidate similar expenses into broader categories unless you need the detail for management decisions.
Discuss COA design with your CPA at setup — accounts need to map cleanly to your tax return (Schedule C, Form 1120-S, Form 1065) so year-end tax preparation does not require manual re-sorting.
Working With Your CPA
How should I share my books with my CPA?
With cloud accounting software (QBO or Xero), you simply grant your CPA Accountant access via the software’s user settings. Your CPA connects to your live books using their professional account — no file transfers, no version conflicts, and your CPA sees real-time data.
See our remote accounting setup guide for the exact steps in QBO and Xero.
What should I have ready before my CPA meeting?
For a quarterly review:
- All bank and credit card accounts reconciled through the end of the quarter
- Accounts receivable aging report
- Profit and Loss year-to-date
- Balance sheet as of quarter-end
- Any unusual transactions flagged with notes
For year-end / tax preparation:
- Year-end bank statements for all accounts
- Loan statements (showing principal vs. interest split)
- List of assets purchased or disposed of during the year
- Vehicle mileage log
- Home office calculation (if applicable)
- Payroll summary and all W-2s issued
My books are a mess from prior years — where do I start?
Start with the current year. Get current books clean before going back. Your CPA can often produce a working tax return from bank statements and credit card records for prior years — not as clean as reconciled books, but functional. Then commit to a clean monthly routine going forward.
Catchup bookkeeping costs less when the scope is defined — give your CPA or bookkeeper a specific date range and a complete set of bank statements, and get a fixed-price quote for cleanup before authorizing open-ended work.
Common Mistakes
What are the most common bookkeeping mistakes Utah small businesses make?
Commingling personal and business expenses. Personal charges in the business account destroy the clarity of your books and complicate your tax return. Open a dedicated business checking account and use it exclusively for business.
Not reconciling monthly. Errors compound. A missed bank reconciliation in February becomes a much larger problem by December.
Using credit cards without recording all transactions. Credit card statements import as individual line items — but if cash expenses are paid without receipts, they never make it into the books.
Miscategorizing transactions. A loan repayment is not an expense. An owner draw is not wages. An equipment purchase is not a supply expense. Miscategorized transactions distort your P&L and your tax return.
Ignoring accounts receivable. Invoices issued but not followed up on turn into bad debt. Review AR aging monthly and follow up on anything over 30 days.
Letting it pile up. The most expensive bookkeeping is the kind done once a year in a panic before the tax deadline. Monthly maintenance takes 30–60 minutes. Annual catchup can cost thousands.
Call (801) 927-1337 or visit cpaone.net/bookkeeping to discuss your bookkeeping setup, get a cleanup quote, or schedule a monthly bookkeeping review with our team.
About the Author: Missy Dennis, CPA is a Partner at FJ & Associates, PLLC in Kaysville, Utah. She holds a Master of Accounting degree from the University of Utah and is a licensed Certified Public Accountant with more than twenty years of public accounting experience. Missy specializes in tax preparation and advisory, bookkeeping strategy alignment, estate and trust taxation, audit and consulting services, low-income housing tax credits, non-profit accounting, and small- and mid-sized business advisory. She is committed to providing clear, accurate, and actionable guidance so clients can navigate complex financial decisions with confidence.
