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Sales Tax Bookkeeping for DIY Owners: Collect, Hold, File (2026)

Sales Tax Bookkeeping for DIY Owners: Collect, Hold, File (2026)

by | Oct 19, 2026 |

Sales tax bookkeeping comes down to one rule and three habits. The rule: sales tax you collect is never income. It is money you hold for the state, so it sits in a liability account from the day of the sale until the day the CDTFA payment clears. The habits: collect the right rate for where the sale happens, reconcile the liability every month, and file the return from the books rather than from bank deposits.

This guide is for owners who keep their own books in QuickBooks Online or Xero and sell taxable goods in California: retail, restaurants, ecommerce, and anyone with a seller’s permit. It arrives ahead of the Q3 return, due Monday, November 2 this year. You will learn how to set the accounts up, what to check each month, how to prepare the return so it matches your books, and the records the CDTFA expects you to keep. This is the routine we run for every client with a seller’s permit at Books LA.

The one rule of sales tax bookkeeping

A customer pays $108 for a $100 item in a 8 percent district. Your revenue is $100. The other $8 goes to a liability account called Sales Tax Payable, and it stays there until you send it to the CDTFA. When the payment leaves the bank, it reduces the liability, not an expense. Nothing about that $8 ever touches the profit and loss.

Every sales tax problem we see in DIY books breaks this rule somewhere. The tax lands in income, so revenue runs high and the return starts from the wrong number. Or the CDTFA payment lands in an expense account, so the liability never clears and the balance sheet shows tax you already paid. Or the cash sits in the operating account and gets spent, which is how a quarterly return turns into a payment plan. The CDTFA’s own guide for new permit holders says the same thing in its language: the tax belongs to the state from the moment you collect it.

Set up the accounts once

  • One liability account per agency. In QuickBooks Online, the Sales Tax center creates it when you set up the CDTFA as an agency. In Xero, a tax rate posts to the Sales Tax liability account automatically. Do not create a second one by hand.
  • Rates named to match the point of sale. If Square or Shopify calls it “Santa Monica 10.25%,” name it the same in the books. Mismatched names are how one sale ends up with two rates.
  • Taxable and nontaxable items separated. Services, resale-certificate sales, and marketplace-facilitated sales go on the return differently from taxable retail. Set the product or service item as taxable or not, once, so every invoice inherits it.
  • A use tax rate for purchases. When you buy taxable goods for the business and the seller charges no California tax, you owe use tax. Xero’s guidance is a separate “use tax owed” rate applied to the bill; in QuickBooks, record it as an adjustment on the return. Either way it needs a home before the quarter ends.
  • Optional, and worth it: a separate bank account. Move the collected tax out of operating cash each month. The balance in that account should roughly equal Sales Tax Payable. If it does, the return is already funded.

Collect: the right rate for where the sale happens

California’s statewide base rate is 7.25 percent, and cities, counties, and special districts add district taxes on top. Many Los Angeles-area addresses land between 9.5 and 10.25 percent, and two shops a few blocks apart can owe different rates. The CDTFA publishes a rate lookup by address; use it for your location and for any delivery address outside your district. Our California sales tax guide covers permits, rates, and who must file in detail.

Two collection traps. First, the county rate is not your rate if your city adds a district tax. Second, deliveries into another district can owe that district’s rate. Ecommerce sellers hit both; our ecommerce bookkeeping guide explains the marketplace rules, where Amazon or Etsy collects and remits for you and those sales are reported but not taxed twice.

Hold: the monthly check that keeps the return honest

Once a month, before the monthly close is finished, run three comparisons.

  • Sales Tax Payable against the point of sale. The tax collected on the POS or ecommerce report for the month should equal the increase in the liability. A difference means a sale was booked without tax or the tax was booked to income.
  • Taxable sales against total revenue. Pull revenue by item type. The taxable portion goes on the return. If every sale shows as taxable and you sell services too, the setup is wrong.
  • Use tax on purchases. Scan the month’s bills for out-of-state purchases of equipment, supplies, or software with no tax charged. The CDTFA expects use tax on business purchases on the same return, in the period you first used the item in California.

Then leave the cash alone. The liability is real money owed to the state. If the operating account cannot carry it, that is a cash flow problem to solve, not a tax payment to defer.

File: from the books, not from bank deposits

The return asks for gross sales, deductions such as nontaxable sales and resale sales, and taxable sales by district. All three numbers come from the books. Filing from bank deposits understates the return, because deposits arrive net of processor fees and sometimes net of refunds. Our deadline-week checklist walks through the pull.

  • Reconcile first. The revenue on the return should equal the quarter’s revenue in QuickBooks or Xero. A mismatch between the two is the audit flag we see most, and the CDTFA compares returns against processor and 1099-K data.
  • Support every deduction. Resale certificates on file for resale sales, item settings for nontaxable services, marketplace reports for facilitated sales.
  • File even at zero. A quarter with no taxable sales still requires a return. Skipping it brings a penalty on a return that owed nothing.
  • Record the payment against the liability. In QuickBooks, record it from the Sales Tax center so the return and the payment are linked. In Xero, record it from the Sales Tax report. After the payment clears, Sales Tax Payable should be close to zero plus the current quarter’s collections.
  • Know your schedule. The CDTFA assigns quarterly, monthly, or annual filing at registration. Larger accounts also make prepayments, generally on the 24th. The current dates are on the CDTFA’s filing dates page and in our Q4 bookkeeping checklist. The Q3 return is due November 2 because October 31 falls on a Saturday.

Late returns and late payments each carry a 10 percent penalty plus interest, per the CDTFA, and the penalty for a late return applies even when the payment was on time.

Keep the records

The CDTFA expects you to keep sales and use tax records for at least four years, longer if an audit or refund claim is open. In practice that means the POS and ecommerce reports, the resale certificates, the filed returns with confirmations, and the books themselves. If the records are attached to the transactions in QuickBooks or Xero, the four years take care of themselves.

Five sales tax bookkeeping mistakes we fix most

  • Tax booked as income. Revenue runs high, the return starts from the wrong number, and the liability account sits empty.
  • CDTFA payment booked as an expense. The liability grows forever and the P&L carries a tax expense that was never yours.
  • Wrong rate. County rate instead of city, or a rate that was never updated after a district change.
  • Marketplace sales taxed twice. Amazon collected and remitted, then the owner reported the same sales as taxable again.
  • No use tax. Equipment and software bought out of state with no tax charged, never self-assessed.

The restaurant bookkeeping guide covers the food-specific version, where hot versus cold and to-go versus dine-in change the answer.

How Books LA handles this

We keep sales tax in its own liability account for every client with a seller’s permit, reconcile it to the point of sale every month, and prepare each return from the books before it is filed. We review use tax on purchases with the monthly bills and attach the filed return with its confirmation in the file for the four-year record. Sales and use tax is squarely in the transactional-tax work we do; income tax stays with your CPA. Our Los Angeles bookkeeping services guide explains where it fits in the monthly service.

Frequently asked questions

Is sales tax an expense or a liability in bookkeeping?

A liability. Tax collected from customers is owed to the state, so it posts to Sales Tax Payable, not to revenue, and the payment to the CDTFA reduces that liability. Sales tax you pay on business purchases is different: it becomes part of the cost of the item.

How do I record a sales tax payment in QuickBooks Online?

From the Sales Tax center, open the return for the period, add any adjustment such as use tax, and select Record payment. That links the payment to the return and reduces Sales Tax Payable. Recording it as an ordinary expense leaves the liability in place.

What rate do I charge in Los Angeles?

The statewide base is 7.25 percent, plus district taxes that push most Los Angeles-area addresses to between 9.5 and 10.25 percent. The rate depends on where the sale happens or where the goods are delivered. Use the CDTFA’s address lookup rather than a county average.

Do I file a sales tax return if I had no sales?

Yes. A seller’s permit requires a return every period, including a zero return. Skipping a quarter with no sales still produces a penalty and can put the permit at risk. File the zero return on time and move on.

What is use tax and do small businesses owe it?

Use tax is the mirror of sales tax. When you buy taxable goods for use in California and the seller charges no California tax, usually an out-of-state online purchase, you owe use tax at your local rate. Permit holders report it on the sales and use tax return for the period of first use.

How long do I keep sales tax records?

At least four years, per the CDTFA, and longer while an audit, appeal, or refund claim is open. Keep the POS reports, resale certificates, filed returns with confirmations, and the books for the period.

When is the Q3 2026 California sales tax return due?

Monday, November 2, 2026, because October 31 falls on a Saturday and the CDTFA moves weekend due dates to the next business day. The Q4 return follows on February 1, 2027. Prepayment accounts also owe the October prepayment on November 24 and the November prepayment on December 24.

If your Sales Tax Payable balance does not look like a number you could pay tomorrow, book a short call and we will check the quarter with you before November 2.

This post is general information, checked against CDTFA publications in October 2026. Rates, schedules, and penalties change, so confirm yours with the CDTFA. Books LA provides bookkeeping and sales tax support and does not advise on income tax.

About the author. Jelena Arkula founded Books LA, a bookkeeping firm in Santa Monica that works with small businesses across Los Angeles in QuickBooks Online and Xero. She writes about the rules that actually affect small businesses, in plain language, without the scare tactics. Books LA does not provide legal or income tax advice.

CPA Bookkeeper Handoff: What CPAs Want From the Books (2026)

CPA Bookkeeper Handoff: What CPAs Want From the Books (2026)

by | Oct 16, 2026 |

A good CPA bookkeeper handoff is a single package, sent once, that answers the tax preparer’s questions before they are asked: a locked trial balance, every bank and card balance tied to a statement, opening balances that agree with last year’s return, loans split into principal and interest, clearing accounts at zero, and a short list of anything unresolved. Everything else the CPA needs is derived from those pieces.

This page is written for two readers. CPAs and enrolled agents who receive files from Books LA, so you know what arrives, when, and how we handle your adjustments. And business owners who want to understand why a clean handoff shrinks the tax bill for preparation. We send this package for every client each January, and the format below is the one we use.

What the CPA bookkeeper handoff package contains

Item What it is Why the preparer wants it
Trial balance, locked Every account and its closing figure as of December 31, on a stated basis (cash or accrual), with a closing date set in the file. The starting point. If it changes after the return is drafted, the return is wrong.
Comparative P&L and balance sheet This year beside last year. Big swings get a question now instead of a notice later.
Bank and card tie-out One line per account: book balance, statement balance, difference of zero, with the December statements attached. The ledger is our record; the statement is the third party’s.
Opening balance check Our January 1 balances compared to last year’s adjusted trial balance, with any difference explained. Retained earnings that do not tie to the prior return is the most common first question.
Loan schedule Each loan: lender, year-end balance per statement, interest paid for the year, principal paid. Only the interest is an expense. The statement proves the split.

The schedules and the open items list

The second half of the package is the supporting detail. Each item is short, and each one answers a question the preparer would otherwise have to ask.

Item What it is Why the preparer wants it
Fixed asset additions and disposals Date, description, cost, invoice attached; anything sold or scrapped. Depreciation is the preparer’s call; the list is ours to supply.
Owner activity Draws, contributions, and shareholder loans, each coded and dated. Equity questions are easier answered in January than in March.
Payroll tie-out Wages and payroll tax expense in the books against the provider’s annual report and the W-3. Payroll is the largest expense for most clients and the easiest to double-count.
Sales tax and 1099 summaries Sales tax payable against the filed CDTFA returns; 1099 vendor totals with W-9s on file. Transactional tax is our lane; the preparer only needs to see it ties.
Open items list Anything we could not resolve, with our best understanding and the question for the client. A short, honest list beats a clean-looking file with surprises inside.

How the package is delivered

The package is one PDF plus a folder of statements, delivered by the end of January for calendar-year clients. The year-end bookkeeping checklist is the client-facing version of the same work, started in Q3.

The tie-outs we finish before anything is sent

A package is only as good as the checks behind it. These are the ones we complete for every file, and the ones we would want if the roles were reversed.

  • Every account reconciled through December. Bank, credit card, loan, and payment processor accounts, each to its statement, each month. Not “the feed is current.” Actually reconciled, with the report saved.
  • Clearing accounts at zero. Undeposited Funds, Opening Balance Equity, “Ask my accountant,” and any suspense account. A balance in one of these is an unfinished entry, so we finish it before sending.
  • Opening balances agree with the prior return. If last year’s adjusting entries were posted, January 1 matches the adjusted trial balance. If they were not, then that is the first thing we fix, and we say so.
  • Payroll liabilities clear after each deposit. The December balance should be the last payroll’s withholding, nothing older. The quarterly DE 9 totals match the books; our California payroll taxes post explains the mechanics.
  • Sales tax payable equals the return. The December balance is the Q4 liability, and the filed returns match the books quarter by quarter as well.
  • 1099 vendors confirmed. Totals by vendor against the $2,000 threshold for 2026 payments, W-9s on file, forms due January 31. The 1099 filing changes for 2026 post covers the IRS system switch.
  • Basis stated. Cash or accrual, written on the cover page, the same basis every year unless the CPA asks for a change.

These checks are the December edition of the monthly bookkeeping close. The reason the package is ready in January is that eleven of the twelve months were closed as they happened.

How we handle the CPA’s adjustments

The preparer will have entries: depreciation, accruals, reclassifications, sometimes a correction to something we coded. The workflow we ask for is simple. First, the CPA sends the proposed adjusting entries with the adjusted trial balance. Then the client approves anything that changes a decision, such as an owner-loan reclass. Next, we post the entries dated December 31, confirm the file now matches the adjusted trial balance to the dollar, and lock the year. Then the next January starts from numbers both sides agree on.

Two things we will not do. First, we do not post an adjustment we do not understand without asking; a one-line note from the CPA saves a round trip. Second, we do not reopen a locked year for a convenience change. If a prior year has to move, the CPA knows first.

What stays with the CPA

Books LA is a bookkeeping firm. We do not prepare income tax returns, advise on income tax, choose entities, or interpret the tax treatment of a transaction. When a client asks us a tax question, the answer is “ask your CPA, and here is the report you will need when you do.” Instead, we provide the records and the transactional-tax work: payroll coordination, sales tax, city business tax, 1099s. The IRS recordkeeping guidance describes the records side; the employment tax due dates page sets the January 31 deadlines we work to. That boundary is deliberate. In fact, it is why CPAs can refer clients to us without competing for the return.

The January calendar

  • By January 15: December closed and reconciled, 1099 vendor list final, W-9 gaps chased.
  • By January 31: 1099-NEC forms filed and furnished; W-2s confirmed with the payroll provider; the handoff package sent to the CPA.
  • February: questions answered within two business days; adjusting entries posted as they arrive.
  • March: the City of Los Angeles business tax renewal filed from the same gross receipts figure, due at the end of February, per our LA business tax guide.

The current quarter’s deadlines are in the Q4 bookkeeping checklist.

The Los Angeles layer

Preparers outside Los Angeles sometimes meet our local items for the first time in a package: the city business tax renewal based on gross receipts, Westside city licenses with their own calendars, CDTFA district rates that vary by where the sale happened, and the EDD side of payroll. We include each as a one-line summary with the filed return attached, so nothing in the package needs local knowledge to read. Our Los Angeles bookkeeping services guide explains the full local calendar.

For CPAs: working with Books LA

We work with roughly thirty small businesses across Los Angeles in QuickBooks Online and Xero, with a near zero variance reconciliation standard and a close that finishes within the first two weeks of each month. If you have a client whose books arrive in March as a shoebox, or a file you spend more hours cleaning than preparing, we would like to be the firm that sends you the package above instead. Referrals go both ways, because our clients need a CPA they can trust, and we recommend the ones who send clear adjusting entries and answer our questions. A short call is enough to see whether the fit is there.

Frequently asked questions

What does a CPA need from a bookkeeper at year-end?

A locked trial balance on a stated basis, comparative financial statements, bank and card balances tied to statements, opening balances that agree with the prior adjusted trial balance, loan balances with the interest split, fixed asset additions, owner activity, payroll and sales tax tie-outs, and a list of open items.

When should the handoff package arrive?

By the end of January for calendar-year businesses, after 1099s are filed. Earlier is better for the preparer’s queue, of course. A package that arrives in March, after extensions are filed, has already cost the client the chance of an early return.

Who posts the CPA’s adjusting entries?

The bookkeeper, dated December 31, after the client approves anything that changes a decision. The bookkeeper then confirms the file matches the adjusted trial balance and locks the year, so the next January starts from agreed numbers.

Why does retained earnings not match last year’s return?

Usually because last year’s adjusting entries were never posted in the file, or a prior-year transaction was changed after the return was filed. The fix is to post the missing entries or reverse the change, and then lock the year. It is the first check in our opening balance review.

Does the bookkeeper handle any taxes?

Transactional taxes, yes: payroll tax records and deposits, sales tax returns, 1099 forms, and the city business tax. Income tax preparation and advice belong to the CPA or enrolled agent. Books LA does not provide income tax advice and works with each client’s CPA on those matters.

What basis should the books be on?

Whatever basis the CPA files on, kept consistent year to year, and stated on the package cover. Many small businesses keep accrual books for management and file on cash; the preparer decides, and the bookkeeper keeps both views reconcilable.

Can a CPA refer a client to Books LA?

Yes. Books LA does not prepare returns, so there is no overlap with the CPA’s work. The client keeps their CPA; we take over the monthly books and send the year-end package described here. A short call with the owner is the usual starting point.

If you are a CPA with a client whose books need this treatment, or an owner whose preparer keeps asking the same questions, book a short call and we will walk through last year’s package together.

This post is general information. Books LA provides bookkeeping services and does not advise on income tax. We work with clients’ CPAs and enrolled agents on income tax matters.

About the author. Jelena Arkula founded Books LA, a bookkeeping firm in Santa Monica that works with small businesses across Los Angeles in QuickBooks Online and Xero. She writes about the rules that actually affect small businesses, in plain language, without the scare tactics. Books LA does not provide legal or income tax advice.

How to Reconcile in QuickBooks Online, and What It Proves (2026)

How to Reconcile in QuickBooks Online, and What It Proves (2026)

by | Oct 14, 2026 |

How to reconcile in QuickBooks Online: open Reconcile under Accounting, pick the account, enter the statement’s ending balance and ending date, check off every transaction that appears on the statement, and finish when the Difference reads $0.00. Reconciled means the books and the bank agree for that period. It does not mean every transaction sits in the right account, only that nothing is missing or doubled.

This guide is for owners who keep their own books and have either never reconciled or have a beginning balance that refuses to match. You will get the exact steps, what a finished reconciliation proves and what it does not, the three failures that cause almost every stuck reconciliation, and the Xero version. This is the check we run on every account, every month, for every client at Books LA.

What reconciled really proves

A reconciliation compares two lists: the transactions in QuickBooks and the transactions on the bank statement. When the ending balances agree and every line has a match, three things are true. Nothing on the statement is missing from the books. Nothing in the books is missing from the statement. And no transaction appears twice. That is the whole claim, and it is a strong one. Most bookkeeping errors show up as one of those three.

What it does not prove is that each transaction sits in the right account. A $1,200 charge coded to Office Supplies instead of Equipment reconciles perfectly. So a reconciled account is the floor, not the ceiling. The coding review in the monthly bookkeeping close is the next layer, and the free DIY monthly close checklist puts both on one page.

How to reconcile in QuickBooks Online, step by step

These steps follow Intuit’s own reconciliation article, checked in October 2026. Menu names move, so if a path does not match your screen, search “Reconcile” inside QuickBooks.

  • 1. Prepare. Have the statement open. Make sure every transaction for the period is categorized or matched in the bank feed. Anything still “For review” will not appear in the reconciliation, which is the most common reason the numbers do not tie.
  • 2. Open the tool. Go to All apps, then Accounting, then Reconcile. First time on an account, select Get started.
  • 3. Choose the account from the dropdown.
  • 4. Check the last statement ending date. Your current statement should begin the day after it. If there is a gap, reconcile the missing period first.
  • 5. Enter the ending balance and ending date exactly as printed on the statement. Then select Start reconciling.
  • 6. Confirm the beginning balance matches the statement’s opening balance. If it does not, stop here and read the next section. Matching transactions on top of a wrong beginning balance wastes the hour.
  • 7. Match transactions. Work down the statement and check the box for each matching line in QuickBooks. The Cleared balance moves as you go.
  • 8. Finish at $0.00. When the Difference shows $0.00, select Finish now, then Done. If it does not, do not force it. Find the difference first.
  • 9. Keep the report. QuickBooks saves a reconciliation report under History by account on the Reconcile page. Lenders, investors, and CPAs ask for these reports.

The adjusting entry trap

One warning. If you cannot find the difference, QuickBooks offers to finish anyway and create an adjusting entry. Intuit’s own advice is to talk to your accountant before doing that. We would put it more plainly: never accept the adjustment. It hides the error instead of fixing it, and it comes back at year-end with interest.

Failure one: the beginning balance is wrong

The beginning balance should equal the ending balance of the last reconciliation. When it does not, QuickBooks shows an alert with a link, “We can help you fix it,” which opens the Reconcile Discrepancy Report. Per Intuit’s fix-it article, that report lists every change to a previously reconciled transaction and how it moved the balance.

If the account has never been reconciled, the cause is usually the opening balance entered when the account was created. Compare that entry to the bank statement from the day before you started tracking the account in QuickBooks. Correcting it often means a journal entry dated before the oldest transaction. This is a fair place to ask your accountant to look before you post it.

Failure two: a reconciled transaction was edited or deleted

Someone changed an amount, moved a transaction to another account, voided it, or deleted it after the month closed. The beginning balance shifts by exactly that amount. The Discrepancy Report shows what changed and offers to fix each item; Intuit’s caution is to only fix a change that was made in error. Deleted and voided transactions also appear in the audit log under Settings.

The prevention is a closing date. After each reconciliation, set the closing date in Account and settings so that changes to a closed period require a password. Reopened months are how a clean file turns into a catch-up project.

Failure three: timing differences

A check written on the 29th that clears on the 3rd. A deposit made on the 31st that posts on the 1st. These are not errors. They are transactions in the books that have not reached the statement yet, and they should stay unchecked this month and get checked next month. The trap is “fixing” them: changing the date to make the month tie, or deleting and re-entering. Both create the failure above. Leave the transaction alone and reconcile it when it clears.

If a transaction stays outstanding for more than two or three months, it is a real question. A check that never cleared, a deposit that never arrived, or a duplicate entry. That is the moment to look, not to adjust.

The Xero version

Xero works the other way around. Statement lines come in through the bank feed, and you match each one to a transaction in Xero or create one. The account is reconciled when the statement balance in Xero equals the balance on the bank’s statement and no lines are left unreconciled. The same three failures apply, with one extra: a feed that stopped and was reconnected leaves a gap of missing statement lines that has to be imported before the balances can agree. Our post on fixing a broken bank feed covers that gap for both products.

After the reconciliation

Once every account ties, read the reports. The balance sheet should show the reconciled cash balance, and the profit and loss should finally be worth reading. Our guide to monthly financial reports lists the lines to check. If reconciling one month turned up six months of problems, that is a catch-up project, and the catch-up bookkeeping cost guide explains what it involves.

How Books LA handles this

We reconcile every bank, card, loan, and processor account to its statement each month, to a near zero variance, and we lock the period afterward. When a beginning balance moves, we find the change in the Discrepancy Report and the audit log before anything else happens in the file. If you have an account that has never reconciled, a $495 bookkeeping review will show what it will take. Our Los Angeles bookkeeping services guide explains what the monthly service includes.

Frequently asked questions

How often should I reconcile in QuickBooks Online?

Monthly, as soon as each statement arrives, for every bank, credit card, loan, and payment processor account. Reconciling quarterly works but makes each difference three times harder to find. Weekly is overkill for most small businesses unless cash is tight.

Why does my beginning balance not match in QuickBooks?

Because a transaction that was reconciled in an earlier month was later edited, deleted, voided, or moved, or because the account’s opening balance was entered wrong. The Reconcile Discrepancy Report, reached from the alert on the Reconcile page, lists the changes and their effect on the balance.

What do I do if the difference is not zero?

Do not finish. Check for transactions still in the bank feed’s For review tab, duplicates, items posted to the wrong account, and amount or date typos. Compare the Cleared balance to the statement. Accepting QuickBooks’s adjusting entry hides the problem rather than solving it.

Can I undo a reconciliation in QuickBooks Online?

You can unreconcile individual transactions from the register, and an accountant user can undo an entire reconciliation. Undo only when the reconciliation itself was wrong, then redo it from the statement. Undoing to make a current month tie usually creates the next discrepancy.

Does reconciled mean my books are correct?

It means nothing is missing or doubled against the bank. It does not check whether each transaction is in the right account or whether a deposit was counted as income twice. Those are separate checks in the monthly close that come after the reconciliation.

Should I reconcile credit cards and loans too?

Yes. Every account with a statement gets reconciled: credit cards, lines of credit, term loans, and payment processors such as Stripe or Square. Loan balances on the balance sheet should match the lender’s statement each month, including the split between principal and interest.

How is reconciling different in Xero?

Xero matches imported statement lines to transactions, rather than checking boxes against a statement total. The account is reconciled when the statement balance in Xero agrees with the bank and no lines are unreconciled. Import any gap from a broken feed first.

If an account has never tied and you want a second set of eyes, book a short call and we will look at the beginning balance with you.

This post is general information, checked against Intuit’s help articles in October 2026. Screens and menu names change. Books LA provides bookkeeping services and does not advise on income tax.

About the author. Jelena Arkula founded Books LA, a bookkeeping firm in Santa Monica that works with small businesses across Los Angeles in QuickBooks Online and Xero. She writes about the rules that actually affect small businesses, in plain language, without the scare tactics. Books LA does not provide legal or income tax advice.

What Does a Bookkeeper Do? The Plain-English Answer (2026)

What Does a Bookkeeper Do? The Plain-English Answer (2026)

by | Oct 12, 2026 |

What does a bookkeeper do? A bookkeeper records every transaction your business makes, reconciles each bank and card account to its statement every month, keeps the payroll, sales tax, and contractor records current, and produces the monthly reports that show whether the business made money and where the cash went. The work is routine on purpose. Its value is that the numbers can be trusted.

This guide is for small business owners who have heard the title a hundred times and still are not sure what the job covers, what it leaves out, and when they need one. It explains the work in plain English, draws the line between a bookkeeper and a CPA, and shows what a normal month looks like at Books LA. If you keep your own books, the list doubles as the job description you are already doing.

What does a bookkeeper do, in one table

Task What it means in practice How often
Record transactions Every sale, purchase, payment, and deposit coded to the right account, with the receipt or invoice attached. Weekly
Reconcile accounts Each bank, card, loan, and payment processor account tied to its statement, to the dollar. Monthly
Invoices and bills Customer invoices issued and tracked, vendor bills entered and scheduled, agings reviewed. Weekly
Payroll records Each payroll posted so wages, employer taxes, and withheld liabilities land in the right accounts; deposits tied to filings. Each payroll
Sales tax Taxable sales tracked and reconciled to the return before it is filed. Monthly or quarterly
Contractor records W-9s collected, payments tracked, 1099 forms prepared in January. Ongoing
Monthly reports Profit and loss, balance sheet, agings, and a note on what moved. Monthly
Year-end package Reconciled books, fixed asset list, loan and equity detail, handed to the CPA. Annually

Most of the job is the first two rows. Everything else depends on them. So when people ask what does a bookkeeper do all month, the plain answer is: record, reconcile, and report, in that order.

Recording: every transaction, coded and supported

Bank feeds in QuickBooks Online and Xero pull transactions in automatically. However, the feed only knows the amount and the payee. The bookkeeper decides what each transaction is, which account it belongs to, and whether a receipt supports it. A $400 charge at a hardware store could be supplies, a repair, or a fixed asset. Each lands on the reports differently.

Good recording also means nothing waits in a parking lot. Accounts named “Ask my accountant” or “Uncategorized” should be empty by month-end. The IRS recordkeeping guidance is short, and attaching the document to the transaction is how a bookkeeper meets it without a filing cabinet.

Reconciling: the part that makes the numbers true

Reconciliation is the monthly test that compares the books to the bank. Every transaction on the statement should be in the books, and every transaction in the books should be on a statement. The ending balances should agree. When they do not, the difference is a duplicate, a missing entry, or a mistake, and the bookkeeper finds it before anyone reads a report.

This step is what separates books that are “caught up” from books that are correct. A feed can be current while the account has never been reconciled. Our guide to the monthly bookkeeping close shows where reconciliation sits in the routine, and the free DIY monthly close checklist lists the twelve checks that follow it.

Reporting: five reports and a short note

Once the month is reconciled, the bookkeeper produces the reports and, in a good practice, a few lines on what changed. The profit and loss answers whether you made money. Next, the balance sheet shows what you own and owe, and whether the cash number is real. Finally, the agings show who owes you and whom you owe. Our post on monthly financial reports explains the lines to read on each one. Reports that arrive six weeks late describe a month nobody remembers, so timing is part of the job.

What a bookkeeper does not do

  • Prepare or advise on income tax. That is a CPA or enrolled agent. A bookkeeper hands over clean books and answers questions; the return and the strategy belong to the tax professional. Books LA does not provide income tax advice.
  • Decide how to structure your business. Entity choice, SAFEs, loan terms: attorney and CPA territory. The bookkeeper records what the documents say.
  • Replace your judgment. A bookkeeper can tell you payroll is 48 percent of revenue. Whether that is a problem is your call.
  • Hold a state license. California licenses CPAs through the Board of Accountancy, but not bookkeepers. Software certifications from Intuit and Xero are the credentials that exist, so ask for them.

Bookkeeper, accountant, CPA: who does what

Role Does When you need them
Bookkeeper Records, reconciles, reports; runs payroll and sales tax records; prepares 1099s and the year-end package. Every month, all year.
Accountant Interprets the books: analysis, forecasting, advice on margins and cash. At decisions and planning points.
CPA or enrolled agent Prepares and signs the income tax return; advises on tax. Year-end and tax questions.

In a small business the bookkeeper is the one who is there every month. The CPA shows up in January and asks for a package. If the package is clean, the CPA’s bill is smaller, which is the quiet way a bookkeeper pays for the service.

What a month looks like at Books LA

In the first week, we code the prior month’s transactions, chase missing receipts, and post payroll. In the second week, we reconcile every account to its statement and clear anything parked. Then we run the five reports, read them the way an owner would, and send a short note on what moved and what needs a decision. Quarterly we tie out the sales tax return and the DE 9 before they are filed, and in December we assemble the year-end package. For clients in Los Angeles we also keep the city business tax calendar; our Los Angeles bookkeeping services guide explains that layer.

When you need a bookkeeper

Not at a revenue number. The signal is the month the close does not get done. Other signals: the P&L shows profit while the bank account is empty, the CPA sends a long list of questions every January, sales tax or payroll filings are a scramble, or you are raising money and the books have to survive an outside look. Our bookkeeper vs DIY post does the cost math, and the bookkeeper cost in Los Angeles guide covers what the service runs here. If you decide to hire, the guide to choosing a bookkeeper lists the questions to ask.

Frequently asked questions

What does a bookkeeper do on a daily basis?

Codes new transactions from the bank feeds, attaches receipts, issues or records invoices and bills, and posts payroll when it runs. Daily is rare for a small business; weekly is the usual rhythm, with the reconciliation and reports done once a month.

What is the difference between a bookkeeper and an accountant?

The bookkeeper records and reconciles what happened and produces the reports. The accountant interprets those reports and advises. A CPA is a licensed accountant who can also prepare and sign the income tax return. Many small businesses use a bookkeeper all year and a CPA at year-end.

Do bookkeepers do taxes?

Bookkeepers handle transactional taxes: payroll tax records and deposits, sales tax returns, 1099 forms. Income tax returns and income tax advice belong to a CPA or enrolled agent. Books LA works with each client’s CPA on income tax matters and does not advise on them.

Do you need a license to be a bookkeeper in California?

No. California licenses CPAs through the Board of Accountancy, but anyone can call themselves a bookkeeper. Software certifications, references, and a sample month-end package are how you check a bookkeeper’s work.

Can QuickBooks replace a bookkeeper?

QuickBooks records and sorts. It does not decide what a transaction is, notice a duplicate, or know that a deposit was counted twice. The software is the tool; the reconciliation and the judgment are the job. Many owners run the software themselves and hire out the monthly close.

How much does a bookkeeper cost?

In Los Angeles, most established small businesses pay between $400 and $1,500 a month for a fixed-scope service, depending on volume, payroll, and sales channels. Catch-up work is priced separately. Books LA packages start at $770 a month.

What does a bookkeeper do at year-end?

Reconciles every month through December, confirms the 1099 vendor list and W-9s, updates the fixed asset list, records the inventory count, and assembles the package the CPA needs: trial balance, loan and equity detail, and answers to the open questions. Done well, the CPA’s part takes days instead of weeks.

If you are not sure whether your books are getting that treatment, book a short call and we will read last month with you.

This post is general information. Books LA provides bookkeeping services and does not advise on income tax. We work with clients’ CPAs on those matters.

About the author. Jelena Arkula founded Books LA, a bookkeeping firm in Santa Monica that works with small businesses across Los Angeles in QuickBooks Online and Xero. She writes about the rules that actually affect small businesses, in plain language, without the scare tactics. Books LA does not provide legal or income tax advice.

Bookkeeping Services Los Angeles: The Complete 2026 Guide

Bookkeeping Services Los Angeles: The Complete 2026 Guide

by | Oct 9, 2026 |

Bookkeeping services Los Angeles small businesses actually need come down to four things. First, every account reconciled to the statement each month. Then clean monthly reports. Third, the local compliance calendar handled: city business tax, CDTFA sales tax, EDD payroll filings. Fourth, a year-end package the CPA can use without cleanup. In Los Angeles that runs from a few hundred dollars a month for very small books to $1,500 or more for payroll-heavy businesses. Books LA packages start at $770 a month.

This guide is for owners in Los Angeles who are hiring a bookkeeper for the first time, replacing one, or deciding whether to keep doing it themselves. It explains what a monthly service should include, what it costs here, and the local items a national provider tends to miss. It also shows how to tell a good provider from a cheap one. Finally, it is the hub for everything we have written on the subject, so each section links to the detailed guide.

What bookkeeping services in Los Angeles should include

Scope is where most bad bookkeeping relationships start. A fixed monthly fee should buy a defined list, and the list should look like this.

Service What it means in practice How often
Bank and card reconciliation Every account tied to the statement, with a reconciliation report. Not “the feed is caught up.” Actually reconciled. Monthly
Transaction coding Each transaction in the right account, with receipts attached. Nothing parked in “Ask my accountant.” Weekly or monthly
Monthly reports Profit and loss, balance sheet, AR and AP agings, and a short note on what moved. See the five reports every owner reads. Monthly, within about two weeks of month-end
Payroll coordination Gross wages, employer taxes, and withheld liabilities posted correctly; EDD deposits and the DE 9 tied to the books. Each payroll, quarterly tie-out
Sales tax support Taxable sales reconciled to the CDTFA return before filing. Quarterly or monthly, by account
1099 tracking W-9s collected before the first payment, vendor totals tracked all year, forms filed in January. Ongoing, January filing
Year-end package Reconciled trial balance, fixed asset list, loan and equity detail, open questions answered before the CPA asks. Annually

What a bookkeeper does not do, in California, is prepare your income tax return or advise on it. That is your CPA or enrolled agent. However, a good bookkeeping service works with them, and we explain the handoff in our guide to what the monthly close includes.

What bookkeeping services Los Angeles businesses pay for in 2026

Los Angeles runs a little above national pricing because the businesses here are more complex: more payroll, more contractors, more sales channels, more cities. So the real answer is a range. For example, very small books with one account and no payroll can be served for a few hundred dollars a month. Most established small businesses pay between $400 and $1,500, at least based on the ranges local firms publish. Businesses with multiple entities, inventory, or heavy payroll pay more, of course. Our bookkeeper cost in Los Angeles guide breaks the range down by what drives it.

At Books LA the packages are public. Light starts at $770 a month, Simple at $1,070, and Full at $1,700, and the packages page lists what each one includes. Catch-up and cleanup work is priced separately as a project. A year of unreconciled books is a different job from keeping current books current. Our catch-up bookkeeping cost post explains how that is quoted.

Two warnings on price. First, a provider quoting under $200 a month for a business with payroll and sales tax is either not reconciling or planning to raise the price later. Second, hourly billing, which some firms still use, makes your cost unpredictable. The 2026 trend is fixed fees for a defined scope, so that is what to ask for.

The Los Angeles layer: what national providers miss

A national bookkeeping service can reconcile a bank account from anywhere. What it usually does not know is the local calendar. Unfortunately, the local calendar is where penalties come from.

  • City of Los Angeles business tax. Any business operating in the city registers with the Office of Finance and renews every year by the end of February, based on the prior year’s gross receipts. Even the small business exemption requires a timely renewal. Full details in our Los Angeles business tax guide.
  • Westside city licenses. Santa Monica, Culver City, West Hollywood, and Beverly Hills each issue their own certificate on their own calendar. Each one wants the receipts earned inside its limits. Our Westside business license guide compares all four.
  • California sales tax. CDTFA returns are quarterly for most accounts, with prepayments for larger ones. Also, the district rate depends on where the sale happens. See the California sales tax guide.
  • California payroll taxes. The EDD side (UI, ETT, SDI, PIT withholding) with its own deposit schedule and quarterly DE 9 filing, explained in our California payroll taxes post.
  • The quarterly calendar. Every deadline for the current quarter is in the Q4 bookkeeping checklist.

The books feed every one of those filings. Gross receipts by city, taxable sales by district, wages by quarter. If the books are not set up to produce those numbers, then each renewal becomes a reconstruction.

Seven things to check before you hire

California does not license bookkeepers. CPAs are regulated by the California Board of Accountancy, but anyone can use the bookkeeper title, which puts the checking on you. These are the questions we would ask in your place, and our guide to choosing a bookkeeper has the full list.

  • Who does the work. The person on the sales call or someone else? Either way, ask to meet whoever will touch your file.
  • Software certifications. With no state license, a QuickBooks Online ProAdvisor or Xero advisor certification is the proof that exists. So ask for it.
  • A sample month-end package. If they cannot show you one, with client details removed, then they are not producing one.
  • What “reconciled” means to them. The right answer is every account to the statement, every month, to the dollar.
  • How they handle the local calendar. Ask about the city business tax renewal. A blank look is an answer.
  • Internal controls. Outsourced bookkeeping gives you a second set of eyes on the money. However, a provider who also wants signing authority on the bank account defeats the purpose.
  • How they scale. A business at $200,000 in revenue and the same business at $2 million need different work. Ask what changes, and what it costs.

If you are replacing a bookkeeper rather than hiring the first one, our switching bookkeepers post covers the handover without losing a month.

Three habits that make any bookkeeping service cheaper

  • Keep business and personal money apart. Commingled accounts cost hours every month to untangle. For an LLC or corporation they can also put the liability shield at risk. In practice: one business checking account, one business card, from day one.
  • Send documents on a rhythm. Receipts, statements, and loan documents in the same place each month, for example a shared folder. Rescue work always costs more than routine work, with every provider.
  • Read the reports. Twenty minutes a month with the five reports catches most problems while they are still small. Otherwise a bookkeeper whose reports go unread is being paid for half the value.

Doing it yourself first

Many owners are not ready to hire, and that is fine. The DIY route works when the books are small and the owner keeps a monthly routine. Also, the IRS recordkeeping guidance is short and applies either way. Our bookkeeper vs DIY post does the cost math, and the free DIY monthly close checklist lists the twelve checks that catch most errors. The usual signal that it is time to hire is not revenue. Instead, it is the month the close does not get done.

How Books LA handles this

Books LA is a bookkeeping firm in Santa Monica, founded by Jelena Arkula after a decade in banking and more than twenty years in bookkeeping. We work in QuickBooks Online and Xero, and we reconcile every account to a near zero variance each month. The Los Angeles calendar is part of every engagement: city renewals, CDTFA, EDD, and the January 1099 filing. Income tax returns are not; those stay with your CPA, and we hand them clean books. If you are not sure what state your books are in, a $495 bookkeeping review will tell you.

Frequently asked questions

How much do bookkeeping services cost in Los Angeles?

Most established small businesses pay between $400 and $1,500 a month, depending on transaction volume, payroll, and sales channels. Very small books cost less, while multi-entity or inventory businesses cost more. Books LA packages start at $770 a month, with catch-up work quoted separately.

What is included in monthly bookkeeping services?

Reconciliation of every bank and card account, transaction coding, monthly financial reports, payroll and sales tax support, 1099 tracking, and a year-end package for the CPA. Anything outside that list, such as bill pay or invoicing, should be named in the agreement before you sign.

Do bookkeepers in California need a license?

No. California licenses CPAs through the Board of Accountancy, but not bookkeepers. Software certifications from Intuit and Xero are the credentials that exist, and references and a sample reporting package tell you more than either.

What is the difference between a bookkeeper and a CPA?

The bookkeeper keeps the books current and reconciled all year and prepares the reports. Then the CPA uses those books to prepare the income tax return and advise on tax. Books LA is a bookkeeping firm and works with each client’s CPA on income tax matters.

Can a bookkeeping service handle the Los Angeles city business tax?

A local one should. The renewal is based on gross receipts, which come straight from the books. The deadline is the end of February each year. Books LA prepares the gross receipts figure, by city where needed, and handles the sales and payroll tax side. Income tax stays with your CPA.

Is online bookkeeping as good as a local bookkeeper?

For reconciliation, yes. For the local calendar and the judgment calls, however, a provider who knows Los Angeles has an edge. Our bookkeeper near me vs cloud bookkeeping post weighs the two.

What happens if my books are a year behind?

That is a catch-up project, priced by months behind and transaction volume, and done before monthly service starts. Patching it inside a monthly fee produces a weak result for both sides. Our catch-up guide explains the ranges and what speeds it up.

How quickly should monthly reports arrive?

Within about two weeks of month-end for most small businesses. Reports that arrive six weeks late, after all, describe a month nobody remembers. So ask any provider when their reports go out, and whether that date is in writing.

If you want a second set of eyes on your books before you decide anything, book a short call and we will go through last month with you.

This post is general information. Books LA provides bookkeeping services and does not advise on income tax. We work with clients’ CPAs on those matters. Rates and local rules change, so confirm anything time-sensitive with the agency or your CPA.

About the author. Jelena Arkula founded Books LA, a bookkeeping firm in Santa Monica that works with small businesses across Los Angeles in QuickBooks Online and Xero. She writes about the rules that actually affect small businesses, in plain language, without the scare tactics. Books LA does not provide legal or income tax advice.

Q4 Bookkeeping Checklist: Every Deadline Oct to Dec (2026)

Q4 Bookkeeping Checklist: Every Deadline Oct to Dec (2026)

by | Oct 8, 2026 |

This Q4 bookkeeping checklist covers every deadline between October and December 2026 for a Los Angeles small business. The third-quarter payroll returns and California sales tax return are due at the start of November. CDTFA prepayments follow on November 24 and December 24. Then comes the year-end work that has to be finished by December 31 so January is calm. Most of the quarter is preparation, not filing.

This guide is for owners who keep their own books in QuickBooks Online or Xero, or who want to know what their bookkeeper should be doing this quarter. You will get the dated list, the prep behind each date, and the year-end checks that save the most money in January. It mirrors our Q3 bookkeeping checklist, and it is the list we work from for every client at Books LA.

The Q4 bookkeeping checklist, by date

Date What is due Who it applies to
October 31, moves to Monday, November 2 Q3 federal payroll return (Form 941) and the Q3 FUTA deposit if the liability reached $500 Employers
October 31, moves to Monday, November 2 Q3 California payroll returns (DE 9 and DE 9C) California employers
October 31, moves to Monday, November 2 Q3 California sales tax return (July through September) Seller’s permit holders on quarterly filing
November 24 CDTFA October prepayment Larger sales tax accounts on prepayment schedules
December 24 CDTFA November prepayment Same accounts
December 31 Inventory count, fixed asset list, 1099 vendor list, W-9s on file, every month reconciled Everyone who wants a clean January
January 15, 2027 Q4 federal estimated tax payment (general information; your CPA sets the amount) Owners with quarterly estimates
January 31, 2027 1099-NEC and W-2 forms to recipients and the IRS; Q4 payroll returns Everyone who paid contractors or employees

The three October 31 dates fall on a Saturday in 2026. The IRS, the EDD, and the CDTFA all move a weekend due date to the next business day. In 2026 that is Monday, November 2. Sources: the IRS employment tax due dates, the EDD’s required filings page, and the CDTFA’s filing dates. We still tell clients to file by Friday, October 30. A deadline that depends on a weekend rule is not one to test.

The November 2 cluster: payroll and sales tax

Three returns share the first business day of November, and all three report the quarter that just ended.

  • Form 941. Reports Q3 wages and federal payroll taxes. If a provider such as Gusto or QuickBooks Payroll files it, log in and confirm the Q3 return shows as submitted. The IRS gives ten extra days to file if every deposit was on time. Do not plan on it.
  • FUTA deposit. If your federal unemployment liability for the year reached $500 by September 30, the deposit is due with the same deadline. Under $500 carries to the next quarter.
  • DE 9 and DE 9C. California’s quarterly contribution return and wage report. Our California payroll taxes guide explains what each line should tie to. The DE 9 totals should equal the quarter’s wages and payroll liabilities in the books, to the dollar.
  • Sales tax return. Covers July through September sales. Reconcile the quarter’s sales to the books and to the point-of-sale or ecommerce reports before filing. The full rules are in our California sales tax guide. File even if the number is zero.

The bookkeeping behind all four is the same: the September close. If September is reconciled, every one of these returns is a report you print, not a number you reconstruct.

November and December: the prepayments and the quiet month

Only larger sales tax accounts make CDTFA prepayments, due November 24 for October and December 24 for November. If you are on that schedule, the amount comes from the month’s taxable sales, so the month has to be closed by the 20th. For everyone else, November and December have no filing deadlines. That is why the real Q4 bookkeeping checklist is a preparation list.

The year-end checklist: finish by December 31

Everything below is cheaper to do in Q4 than in January, when your CPA is waiting and the 1099 deadline is three weeks away.

  • Collect W-9s now. For payments made in 2026, the 1099-NEC threshold is $2,000, up from $600. Pull a report of every vendor paid $2,000 or more this year, and get a W-9 from any that is missing. The 1099-NEC is due to recipients and the IRS by January 31, per the IRS. A vendor who ignored you in December will ignore you in January too.
  • Review the 1099 vendor list for classification. Corporations are generally exempt from the 1099-NEC; LLCs taxed as partnerships or sole proprietors are not. The W-9 tells you which. Confirm edge cases with your CPA.
  • Count inventory on December 31. Retail, ecommerce, and restaurants all need a physical count. Book the adjustment so the balance sheet matches the shelf.
  • Update the fixed asset list. Every purchase over your capitalization threshold this year, with date and cost, so the CPA can calculate depreciation. Equipment bought in December counts.
  • Reconcile every month through December. Bank, card, loan, and payment processor accounts. A year with twelve reconciled months is what makes the CPA package fast. Our monthly bookkeeping close post lists the full routine, and the free DIY monthly close checklist puts it on one page.
  • Clear the parking lots. Undeposited Funds, “Ask my accountant,” and any suspense balance should be empty before the year closes.
  • Check owner draws and loans. Every owner withdrawal coded as a draw, every owner contribution coded as equity or a loan, with a note. These are the first questions a CPA asks.
  • Book the CPA meeting in December. Calendars fill. A January slot booked now beats a March slot found later.

The Los Angeles layer

Two local items belong on a Los Angeles Q4 bookkeeping checklist even though nothing is filed this quarter. The City of Los Angeles business tax renewal for 2027 is based on your 2026 gross receipts. It is due at the end of February. Our Los Angeles business tax guide covers the exemption and the dates. Get the gross receipts number ready in December, by city if you operate in more than one. Westside businesses with Santa Monica, Culver City, West Hollywood, or Beverly Hills certificates track the same number per city; our Westside business license guide has each city’s calendar.

Second, the holidays. For retail, restaurants, and ecommerce, Q4 is the cash flow quarter. Processor holds, inventory bought in October and sold in December, and seasonal staff all hit the bank account at different times. None of them line up with the sales. The 13-week cash view in our Q4 cash flow planning post is the tool for it.

Twenty minutes a week, in this order

  • Week 1 of October: close September. Reconcile every account, then print the Q3 payroll and sales reports you will file from.
  • By October 30: file the 941, DE 9, DE 9C, and sales tax return, or confirm the provider did. Deposit FUTA if it reached $500.
  • November: run the vendor report, send W-9 requests, close October by the 15th.
  • December: close November, update the fixed asset list, schedule the inventory count, book the CPA, pull the gross receipts number for the city renewal.
  • December 31: count inventory. Then close December in the first two weeks of January, before the 1099s go out.

How Books LA handles this

Every client close in October includes the Q3 tie-outs, so the November 2 returns are printed from reconciled books. In November we send each client their 1099 vendor list with the W-9 gaps marked, and in December we prepare the year-end package the CPA will ask for. If your books are behind going into Q4, a $495 bookkeeping review will show what has to happen before December 31. Our monthly packages describe what each level includes.

Frequently asked questions

When is the Q3 2026 Form 941 due?

October 31, 2026, which is a Saturday, so the IRS moves it to Monday, November 2. Employers who deposited every payroll tax on time get ten additional calendar days to file. The Q3 FUTA deposit, if the liability reached $500, follows the same deadline.

When is the Q3 California sales tax return due?

October 31 for quarterly filers, moved to Monday, November 2 in 2026 under the CDTFA’s weekend rule. Accounts on prepayment schedules also owe the October prepayment on November 24 and the November prepayment on December 24. Confirm your filing frequency in your CDTFA account.

What is the 1099 threshold for 2026 payments?

$2,000 for payments made during 2026, up from $600 in prior years. The form is still due to recipients and the IRS by January 31. Collect W-9s from every vendor at or above the threshold before year-end, and confirm classification questions with your CPA.

Do I need to file the DE 9 if I paid no wages in Q3?

Yes. The EDD treats you as an employer until the account is closed, so a DE 9 and DE 9C are required even for a quarter with no payroll. File a no-payroll return through e-Services for Business rather than skipping it.

What should be done before December 31?

The physical inventory count, the fixed asset list, the 1099 vendor list with W-9s on file, owner draws and contributions coded correctly, and every month reconciled through December. Those items are what the CPA package is built from in January.

Does Q4 include any Los Angeles deadlines?

No filings, but the 2027 City of Los Angeles business tax renewal is based on 2026 gross receipts and comes due at the end of February. Pull the number in December. Westside cities with their own certificates each want the receipts earned inside that city.

Can a Q4 bookkeeping checklist help if my books are months behind?

It tells you what the deadlines are, but the November 2 returns still need September closed. If the books are more than a quarter behind, treat it as a catch-up project first, then work the list. Our catch-up bookkeeping cost guide explains what that involves.

If you want someone to run this list with you before November 2, book a short call and we will go through last quarter together.

This post is general information, checked against IRS, EDD, and CDTFA pages in October 2026. Dates and thresholds change, so confirm yours with the agency. Books LA provides bookkeeping services and does not advise on income tax. Estimated tax amounts and 1099 classification questions belong with your CPA or enrolled agent. We work with clients’ CPAs on those matters.

About the author. Jelena Arkula founded Books LA, a bookkeeping firm in Santa Monica that works with small businesses across Los Angeles in QuickBooks Online and Xero. She writes about the rules that actually affect small businesses, in plain language, without the scare tactics. Books LA does not provide legal or income tax advice.

Santa Monica Business License vs 3 Westside Cities (2026)

Santa Monica Business License vs 3 Westside Cities (2026)

by | Oct 2, 2026 |

A Santa Monica business license is required for anyone doing business in the city. It costs $75 plus a percentage of gross receipts over $60,000, and it renews every July 1 with a grace period to August 31. Culver City, West Hollywood, and Beverly Hills each run their own version, on their own calendar. If you work in more than one of them, you probably need more than one certificate.

This guide is for owners who operate on the Westside: a shop or office in one city, clients or job sites in the others. You will learn who each city requires to register, what each tax is based on, and when each one renews. Then we show how to keep the books so all four renewals take an hour instead of a weekend. We prepare these renewals for Los Angeles clients every year at Books LA, and the mistakes below are the ones we fix most.

The four Westside cities compared

All four cities tax gross receipts, not profit. All four require a certificate before or shortly after you start doing business there. The details differ in ways that matter. We checked the figures below against each city’s own pages in September 2026. The exact rate for your business type comes from the city’s schedule, which each site links.

City Who must register Tax basis License year and renewal Notes
Santa Monica Every person or entity engaging in business in the city, taxable or not $75 plus a percentage of calendar-year gross receipts above $60,000, rate by classification July 1 to June 30; due July 1, no penalty through August 31 Small business exemption under $103,000 worldwide receipts; the license and fees still apply
Culver City All businesses operating in the city, wherever the main office is; within 30 days of starting Gross receipts, rate by business activity per the municipal code Calendar year; notice mailed early December; delinquent after the last day of February Late penalty 20 percent per month, up to 100 percent
West Hollywood Businesses operating in the city; certificate required before operating Prior calendar-year gross receipts, rate by classification (professional services $1.44 per $1,000, per the city’s FAQ) Certificates expire February 1; renew and pay by May 1 Tax for the May 1, 2026 renewal is on 2025 receipts
Beverly Hills Any entity doing business in the city, whether or not the location is inside city limits; within 30 days of starting Gross receipts for most classifications, per the city’s schedule of taxes, fees and charges Registrations expire December 31, per the municipal code Some classifications tax receipts above $60,000; check the schedule

Where these figures come from

Sources: the Santa Monica renewal page, the Culver City business license page, the West Hollywood business tax page, and the Beverly Hills business tax page. The City of Los Angeles is a fifth calendar for many Westside businesses. Our Los Angeles business tax guide covers it, including the $100,000 small business exemption and the March 2, 2026 renewal deadline.

Santa Monica business license: what the city actually charges

Santa Monica’s structure is the easiest to explain. The tax is $75 plus a percentage of your calendar-year gross receipts above $60,000. The percentage depends on your classification, and the city publishes a tax calculator for it. Two details trip people up.

  • The exemption is not a pass on the license. Businesses under $103,000 in worldwide gross receipts can qualify for the small business exemption. However, the license itself is still required and the fees are still due. Renew after August 31 and the exemption is lost.
  • The city can audit your books. The municipal code lets the Finance Department examine the records of anyone doing business in the city. Gross receipts on the renewal should match the books, and the city can ask you to prove it.

The license year runs July 1 to June 30, so a Santa Monica business license renews on a different calendar from every other city on this list. Our Santa Monica bookkeeping guide covers the rest of the local calendar.

Culver City, West Hollywood, and Beverly Hills: the differences that matter

Culver City and Beverly Hills both run on the calendar year. Both give you 30 days from starting business to register. Culver City mails renewal notices in early December, and the tax is delinquent after the last day of February. So Culver City’s deadline lines up with the City of Los Angeles, which helps if you operate in both. The penalty does not help: 20 percent per month, up to 100 percent of the tax.

West Hollywood is the odd one out. Certificates expire February 1, but the city gives until May 1 to renew and pay, on the prior year’s receipts. Professional services pay $1.44 per $1,000 of gross receipts, per the city’s FAQ. Other business types have their own rates. Beverly Hills registrations expire December 31. Most business types there are taxed on gross receipts per the city’s fee schedule, some only above $60,000. Confirm your business type with the city, because that one choice sets the rate.

The multi-city trap for mobile and service businesses

Every one of these cities requires a certificate from businesses that operate inside its limits, wherever the office is. Culver City says so directly: “no matter where their main office may be located.” Beverly Hills says “whether or not the physical location is within city limits.” Think of a contractor based in Culver City with a job in Beverly Hills. Or a caterer in Santa Monica serving events in West Hollywood. Or a consultant who visits client offices in three cities. Each of them is doing business in more than one city.

The practical rules we give clients:

  • Register where you regularly work, not only where you sit. A one-time delivery is a judgment call; a recurring client site is not.
  • Apportion, do not double-count. Santa Monica publishes a method for splitting receipts earned inside and outside the city. Report the receipts earned in each city, and keep the worksheet.
  • Keep the certificates with the books. Every city can ask for the certificate at a job site or during an audit. Attach each one to the fee payment in QuickBooks Online or Xero, so it is one click away.

How to keep the books so renewals take an hour

Four renewals on four calendars is manageable. The books just need to answer the one question each city asks: what were your gross receipts, and how much was earned here?

  • Track receipts by city. Use a class in QuickBooks Online or a tracking category in Xero, set on every invoice. At renewal, one report gives each city its number.
  • Define gross receipts the way the city does. Each city publishes a definition. Sales tax collected, for example, is generally not gross receipts. Match the report to the definition before you file.
  • Code license taxes as taxes, not as fees. Business license tax belongs in a taxes and licenses account, apart from bank fees and software. It matters for the P&L, and for the next renewal when someone asks what you paid last year.
  • Put the four dates on one calendar. Culver City and Los Angeles at the end of February, West Hollywood May 1, Santa Monica August 31 at the latest, Beverly Hills December 31. Our California sales tax guide covers the CDTFA dates that sit between them.

How Books LA handles this

We track gross receipts by city for every client who works across the Westside. We tie the number to the filed sales tax returns, then prepare each renewal from the books rather than from memory. When a city audits, the worksheet is already there. Our monthly packages include local tax support at the levels that need it.

Frequently asked questions

Do I need a Santa Monica business license if my office is in Los Angeles?

If you regularly do business inside Santa Monica, yes. The city requires every person or entity engaging in business there to obtain a license, taxable or not. Receipts earned in Santa Monica go on the Santa Monica renewal. The rest stay with your home city.

How much is a Santa Monica business license?

The tax is $75 plus a percentage of calendar-year gross receipts above $60,000. The percentage depends on your business type. Regulatory fees may apply to specific activities. The city’s online calculator gives an estimate once you know your business type and receipts.

When is the Santa Monica business license renewal due?

July 1 each year, for the license year running July 1 to June 30. The municipal code allows a 60-day grace period, so the last day to renew without penalty is August 31. Renewing after that also forfeits the small business exemption.

Is the Santa Monica small business exemption automatic?

No. Businesses under $103,000 in worldwide gross receipts can claim it on a timely renewal, but the license and associated fees are still required. Miss the August 31 deadline and the city charges the full tax plus late penalties.

When does Culver City business tax become delinquent?

After the last day of February. The certificate covers the calendar year and renewal notices go out in early December. Late payment carries a penalty of 20 percent per month, up to 100 percent of the tax due.

When is the West Hollywood business tax certificate due?

Certificates expire February 1, and the city’s last day to renew and pay on time is May 1. The tax for the May 1, 2026 renewal is based on 2025 calendar-year receipts. Rates vary by business type. The city’s FAQ lists professional services at $1.44 per $1,000.

Does Beverly Hills require a business license for out-of-town contractors?

Yes. Any entity doing business in Beverly Hills must get a Business Tax Registration Certificate before or within 30 days of starting. It does not matter whether the location is inside the city. Contractors have their own registration procedure in the municipal code.

Can I pay one license and cover all four cities?

No. Each city issues its own certificate and collects its own tax on the receipts earned there. Report to each city only the receipts earned inside it, and keep the worksheet that shows the split.

If your business works across more than one Westside city and the renewals have become a guessing game, book a short call and we will map your receipts to each city with you.

This post is general information, checked against each city’s published pages in September 2026. Rates, business types, and deadlines change, so confirm yours with the city before filing. Books LA provides bookkeeping and local tax support and does not advise on income tax.

About the author. Jelena Arkula founded Books LA, a bookkeeping firm in Santa Monica that works with small businesses across Los Angeles in QuickBooks Online and Xero. She writes about the rules that actually affect small businesses, in plain language, without the scare tactics. Books LA does not provide legal or income tax advice.

Startup Bookkeeping Due Diligence: 5 Systems to Build First (2026)

Startup Bookkeeping Due Diligence: 5 Systems to Build First (2026)

by | Sep 30, 2026 |

Startup bookkeeping due diligence comes down to five systems: a monthly close that finishes on time, revenue that ties to contracts and bank deposits, a balance sheet that carries every SAFE, note, and loan, a burn and runway report built from real cash, and clean separation between the company and its founders. Build those before the round, and diligence becomes a file transfer instead of a scramble.

This guide is for founders in Los Angeles who plan to raise money or apply for a business loan in the next twelve months and keep their own books, or have a bookkeeper and are not sure the file would survive an outside look. You will learn what investors and lenders actually request, the five systems that produce it, and the order to build them in. We prepare this kind of file for clients at Books LA, so the list below is the one we work from.

What startup bookkeeping due diligence actually asks for

Every investor and lender has a different checklist, but the financial section repeats. As a rule, they want the same things a careful owner would want. Below is the list we see most often, with the report or record that answers it.

They ask for What answers it What breaks it
Monthly financial statements for the last 24 months P&L, balance sheet, and cash flow from a closed month, same basis every month Books that were “caught up” in one batch, so months are not comparable
Revenue by customer and by month Invoices and contracts that tie to bank deposits Revenue booked when cash arrived, with no link to a contract or invoice
Bank and card statements with reconciliations A reconciliation report for every account, every month Unreconciled months, duplicate accounts from feed reconnects
Cap table and debt schedule SAFEs, convertible notes, and loans on the balance sheet, matching the legal documents A SAFE that exists in a PDF but not in the books
Burn rate and runway A monthly net cash burn figure and a 13-week cash view A “burn” number that changes every time someone recalculates it
Payroll and contractor records Payroll registers, filed returns, W-9s and 1099s Contractors paid from personal accounts, missing W-9s

Lenders are more explicit than investors. For the SBA’s 7(a) working capital program, for example, the SBA lists “timely and accurate financial statements, accounts receivable and accounts payable agings, and inventory reports” as what a business should be able to produce. Investors ask for the same set, plus revenue detail and the cap table.

System 1: a monthly close that finishes on time

The single strongest signal in startup bookkeeping due diligence is a stack of closed months. Not a year rebuilt in a weekend, but twelve or twenty-four months that were each closed within a couple of weeks of month-end. So the first system is a close routine with a deadline.

  • Reconcile every account to the statement. Bank, credit card, payment processor, and loan accounts. A variance of a few dollars is still a variance.
  • Clear the parking lots. Undeposited Funds, “Ask my accountant,” and suspense should be empty by the time the month closes.
  • Produce the same package every month. P&L, balance sheet, cash flow, agings, and a short note on what moved. Our guide to the monthly bookkeeping close lists the full routine.
  • Lock the period. Set a closing date in QuickBooks Online or Xero once the package goes out. Reopened months are the reason diligence teams find numbers that changed.

If you do your own books, the free DIY monthly close checklist puts the twelve checks on one page. Aim to finish within fifteen business days of month-end. That pace is what an investor’s accountant expects from a company that says its books are current.

System 2: revenue that ties to contracts and deposits

Revenue is where diligence teams spend the most time, because it is where the pitch deck and the books most often disagree. The test is simple. Pick a customer, find the contract or order, find the invoice, and find the deposit. All four should agree on amount and timing.

  • Invoice everything. Even a card payment through Stripe should sit behind an invoice or a sales receipt, so revenue by customer is a report and not a spreadsheet.
  • Record processor fees separately. A $1,000 sale that lands as $971 is $1,000 of revenue and $29 of fees. Booking the net understates both.
  • Track deferred revenue if you bill ahead. Annual subscriptions and retainers are a liability until the service is delivered. If your deferred revenue balance cannot be rebuilt from your subscription list, something is off.
  • Keep the basis consistent. Most investors expect accrual reports. Whether your company should convert, and how, is a conversation for your CPA. The books just need to be clean enough to convert.

System 3: a balance sheet that carries every SAFE, note, and loan

A SAFE that lives in a signed PDF and nowhere else is the most common finding we see in startup files. The same goes for a founder loan repaid from a personal account, or a credit line that was never set up as a liability. Each of these is small to fix and expensive to discover, because the reviewer then asks what else is missing.

  • Every instrument gets an account. One liability or equity account per SAFE, note, or loan, named after the document, with the balance matching it.
  • Keep a debt schedule. Lender, original amount, current balance, rate, and payment. Lenders ask for exactly this list.
  • Match the cap table to the equity section. The bookkeeper does not maintain the cap table. However, the equity accounts should agree with it after every round.

How a SAFE or note should be structured, and how it converts, is a question for your attorney and CPA. Books LA records what the documents say; we do not design them.

System 4: burn and runway from real cash

Burn rate is the number founders quote most and document least. In diligence it needs to come from the books, the same way every month. The cleanest definition is net cash burn: cash at the start of the month minus cash at the end, adjusted for any money raised or borrowed. Runway is cash on hand divided by average burn over the last three months.

Build it as a monthly line on the close package, then extend it forward with a 13-week cash view. The mechanics are in our Q4 cash flow planning post, and the five reports that feed it are in monthly financial reports. When an investor’s number and yours disagree, the version that ties to bank statements wins.

System 5: clean separation between the company and the founders

Commingled money is the fastest way to lose a reviewer’s trust. It also makes every other system harder, because personal transactions have to be picked out of each month before the close can finish.

  • Company accounts only. One business checking account, one business card, and no company expenses on personal cards after the first month.
  • Founder money is documented. Cash a founder puts in is a loan or a capital contribution, recorded as one or the other, with a note. Cash a founder takes out is a draw, a repayment, or payroll.
  • Contractors have W-9s. Collect the form before the first payment. The IRS recordkeeping guidance is short and worth reading once.
  • Receipts are attached. QuickBooks Online and Xero both attach documents to transactions. A diligence request for “support for these twenty expenses” then takes minutes.

The order to build them in

If the books are behind, do not start with burn rate. Start with reconciliations, because nothing above can be trusted until cash ties. Then close the months in order, oldest first, so revenue and balances build correctly. Add the SAFE and loan accounts as you reach the months they were signed. Burn and runway come last, since they are calculated from everything else. A file that is more than a few months behind is a catch-up project, and it is cheaper to price it as one than to patch it.

The Los Angeles layer

Local diligence adds a few items to the list. LA City Business Tax registration and the annual renewal, a Santa Monica or other city license where the company operates, CDTFA registration if anything taxable is sold, and EDD registration from the first payroll. Reviewers check that the company is registered where it says it operates. Missing local registrations are a small dollar amount and a large credibility problem.

How Books LA handles this

We run the monthly close on a fixed calendar, reconcile every account to a near zero variance, and keep the SAFE, loan, and equity accounts tied to the documents. Before a raise or a loan application, we assemble the last 24 months into one package and read it the way the other side will. If your books are not there yet, a $495 bookkeeping review will show what the file currently supports. Our monthly packages describe what each level includes.

Frequently asked questions

What financial records do investors ask for during due diligence?

Monthly financial statements for the last 24 months, bank and card statements with reconciliations, revenue by customer, the cap table with every SAFE and note, a debt schedule, payroll and contractor records, and a burn and runway calculation. Most requests are variations on that list.

How far back do the books need to be clean?

Two full years is the common request, or since formation if the company is younger. Every month in that window should be reconciled and closed. A single rebuilt year is a weaker signal than twelve individually closed months.

Do startups need accrual accounting before raising money?

Most investors expect accrual reports, especially for subscription or contract revenue. Whether and when to convert, and the tax basis your company files on, are decisions for your CPA. Clean, reconciled books can be converted; messy ones cannot.

How should a SAFE appear in the books?

As its own account on the balance sheet, named after the document, with a balance equal to the amount received. Whether it sits in liabilities or equity depends on its terms. Ask your CPA or attorney for the classification, then record it and keep it tied to the cap table.

What is a good monthly close deadline for a startup?

Within fifteen business days of month-end for most early companies, and faster as the team grows. The deadline matters more than the exact number of days. A close that always finishes is the habit reviewers are looking for.

Can a founder fix startup bookkeeping due diligence problems in a month?

Often, if the gaps are reconciliations and missing accounts. Start with the bank reconciliations, close months in order, and add the instruments as you reach them. Books that are a year or more behind usually need a priced catch-up project, not a month of evenings.

What do lenders ask for that investors do not?

Lenders lean on formal documents: filed tax returns for two to three years, a personal financial statement from each large owner, a debt schedule, and current statements dated within the last few months. Investors lean on revenue detail and the cap table. Both want reconciled books.

If you are planning a raise or a loan and are not sure the books are ready, book a short call and we will read the last quarter with you.

This post is general information. Books LA provides bookkeeping services and does not advise on income tax, entity structure, or securities. We work with each client’s CPA and attorney on those questions; confirm anything above with yours.

About the author. Jelena Arkula founded Books LA, a bookkeeping firm in Santa Monica that works with small businesses across Los Angeles in QuickBooks Online and Xero. She writes about the rules that actually affect small businesses, in plain language, without the scare tactics. Books LA does not provide legal or income tax advice.

Monthly Financial Reports: The 5 Every Owner Reads (2026)

Monthly Financial Reports: The 5 Every Owner Reads (2026)

by | Sep 28, 2026 |

Monthly financial reports worth a small business owner’s time come down to five: the profit and loss statement, the balance sheet, the accounts receivable aging, the accounts payable aging, and a cash view for the next few weeks. Read those five for twenty minutes a month and you will catch most problems while they are still small. Everything else is detail.

This post is for owners in Los Angeles who receive reports from their bookkeeper, or run them in QuickBooks Online or Xero, and are not sure which ones matter or what to look for. You will learn what each report answers, the specific lines to check, the numbers that signal trouble, and the order to read them in. This is the review we walk clients through after every close at Books LA.

The five monthly financial reports, and the question each one answers

Report The question it answers Read it when
Profit and loss statement Did we make money this month, and where did it go? First, every month
Balance sheet What do we own and owe, and is the cash number true? Second, every month
Accounts receivable aging Who owes us, and how late are they? Monthly, weekly if cash is tight
Accounts payable aging Who do we owe, and what is due before payroll? Same cadence as receivables
Cash view (13-week or simple forecast) Will there be enough cash for the next payroll, rent, and tax deposit? Monthly, more often in slow seasons

Most guidance, including the U.S. Chamber of Commerce’s list of monthly reports, lands on the same core set. The difference between owners who benefit and owners who skim is knowing which lines to look at. That is the rest of this post.

The profit and loss statement: five lines, not fifty

The profit and loss statement lists revenue, costs, and expenses for the month, and the net result at the bottom. Do not read it top to bottom. Read these five things, comparing this month to last month and to the same month last year.

  1. Revenue by line. Which product or service moved, and is the mix shifting? A flat total can hide one line falling while another grows.
  2. Gross margin. Revenue minus direct costs, as a percentage. If it drops two points, a supplier raised prices, a discount ran too long, or something was miscoded.
  3. Payroll as a share of revenue. The largest expense for most service businesses. Watch the percentage, not the dollars.
  4. The three biggest other expenses. Usually rent, software, and marketing. Anything new in the top three deserves a question.
  5. Net profit, then owner pay. Remember that owner draws are not on this report. A profitable P&L with heavy draws can still leave the bank empty, which is why the balance sheet comes next.

If your report has more than about thirty expense lines, ask for them to be grouped. Detail belongs in the general ledger, not in the monthly review. Our post on the mid-year financial review shows the same lines over a longer window.

The balance sheet: where the errors hide

The balance sheet is a snapshot of what the business owns and owes on the last day of the month. Most owners skip it because it looks abstract. It is the report that catches bookkeeping mistakes, so spend five minutes on these checks.

  • Cash matches the bank. Every bank and card balance on the report should equal the statement balance after reconciliation. If it does not, nothing else on either report can be trusted.
  • No negative balances. Negative cash, negative receivables, or negative payables mean something was booked backwards.
  • Undeposited funds is near zero. A growing balance here means income is being counted twice or deposits are not being matched.
  • Liabilities move the right way. Sales tax payable should tie to the return you are about to file. Payroll liabilities should clear after each deposit. Loan balances should go down.
  • No “Ask my accountant” or suspense balance. Those accounts are parking lots. By month-end they should be empty.

These checks are the same ones in the monthly bookkeeping close, and the free DIY monthly close checklist puts them on one page.

The two agings: who owes you and who you owe

The accounts receivable aging lists every unpaid customer invoice by how old it is. The accounts payable aging does the same for bills you owe. Together they explain most of the gap between the profit on the P&L and the cash in the bank.

  • On the AR aging, look at everything over 60 days and decide on each one this month: call, discount, or write off. Old receivables do not age into cash.
  • On the AP aging, look at what is due before the next payroll and rent. Then check for bills that appear twice or vendors you no longer use.
  • Compare the totals month over month. Receivables growing faster than revenue means collections are slipping. Payables growing faster than purchases means cash is being stretched.

The cash view: the report that prevents surprises

The formal cash flow statement is useful for a CPA or a lender, but for monthly decisions a simpler view works better. Start with the bank balance today, add expected receipts from the AR aging, subtract the AP aging, payroll, rent, loan payments, and the next sales tax and payroll tax deposits. Do it for the next four to thirteen weeks. The output is one number per week: projected cash. When a week goes negative, you have time to act. Our Q4 cash flow planning post walks through the mechanics.

Twenty minutes, in this order

  1. Balance sheet first, two minutes: does cash tie, and are there any negative or parked balances? If not, stop and ask the bookkeeper before reading anything else.
  2. Profit and loss, eight minutes: the five lines above against last month and last year.
  3. Agings, five minutes: anything over 60 days, anything due before payroll.
  4. Cash view, five minutes: any week in the next quarter that goes negative.
  5. Write down the three questions that came up and send them to your bookkeeper in one message.

That last step matters. A monthly review that produces three questions is working. One that produces none usually means the reports were skimmed.

How Books LA handles this

Every client close ends with these five reports and a short note pointing at what moved and what needs a decision. We reconcile the balance sheet before the P&L goes out, so the cash number is one you can act on. If you are getting reports you do not read, or not getting a balance sheet at all, a $495 bookkeeping review will show you what your file currently supports. Our monthly packages describe what each level delivers.

Frequently asked questions

What financial reports should a small business review every month?

At minimum the profit and loss statement, the balance sheet, the accounts receivable and payable agings, and a short cash forecast. Those five answer whether you made money, whether the numbers are true, who owes whom, and whether cash will hold for the next several weeks.

What is the difference between a profit and loss statement and a balance sheet?

The profit and loss statement covers a period and shows revenue, expenses, and profit for that month. The balance sheet is a snapshot on one date and shows assets, liabilities, and equity. Profit lives on the first; cash, debt, and errors show on the second.

Which report tells me if I can afford to hire?

None of them alone. Use the P&L for the trend in revenue and margin, and the cash view to test whether the added payroll clears every week for the next quarter. If the cash view holds, the P&L confirms it is sustainable.

Why does my P&L show profit but my bank account is empty?

Usually owner draws, loan principal payments, or unpaid customer invoices. None of those are expenses, so they never reduce profit, but all of them reduce cash. The balance sheet and the AR aging show where the money went.

How often should I look at the accounts receivable aging?

Monthly at minimum, weekly if cash is tight or you carry a lot of invoices. The point is to act on anything over 60 days while the customer still remembers the work.

Do I need a cash flow statement or a cash forecast?

For monthly decisions, a simple forward cash forecast is more useful than the formal cash flow statement. Keep the formal statement for your CPA and lenders; use the forecast to see the next payroll coming.

Should reports be on a cash basis or accrual basis?

Run management reports on the basis that matches how you decide, and keep the tax basis consistent with what your CPA files. Many small businesses review accrual for the picture and file on cash. Whichever you choose, use the same basis every month so comparisons hold.

If your monthly reports raise more questions than they answer, book a short call and we will read last month’s set with you.

About the author. Jelena Arkula founded Books LA, a bookkeeping firm in Santa Monica that works with small businesses across Los Angeles in QuickBooks Online and Xero. She writes about the rules that actually affect small businesses, in plain language, without the scare tactics. Books LA does not provide legal or income tax advice.

QuickBooks Bank Feed Not Working? Fixes for QBO and Xero (2026)

QuickBooks Bank Feed Not Working? Fixes for QBO and Xero (2026)

by | Sep 25, 2026 | ,

A QuickBooks bank feed that stops working is almost always a connection problem between your bank and the software, not a problem with your books. The fix is usually to update the feed manually, wait for the bank, or reconnect the account. The bookkeeping risk comes afterwards: the gap in transactions and the duplicates a careless reconnect creates.

This guide is for owners who keep their own books in QuickBooks Online or Xero and have just seen the red “connection error” banner. You will learn why feeds break, the exact steps that fix them, how to fill the gap without double-counting, and the signs that the feed is the symptom of a bigger problem. We reconnect feeds for clients every month at Books LA, so this is the routine we follow.

Why a QuickBooks bank feed stops working

Bank feeds are not a direct wire to your bank. They run through a connection that the bank can change or interrupt at any time. The usual causes, in the order we see them:

  • The bank changed something. A new login page, a security update, or a maintenance window breaks the handshake. QuickBooks reports this as error 102 or 105, and Intuit’s own advice is to wait 24 to 48 hours before assuming the fault is on your side.
  • Your credentials changed. A new password or a new multi-factor prompt at the bank means the stored connection can no longer sign in.
  • The connection expired. Many banks now require you to re-authorize the link every few months. The feed stops quietly on the day the consent lapses.
  • The bank account itself changed. A closed card, a replacement card number, or a renamed account leaves the feed pointing at nothing.
  • The person who set it up left. In Xero especially, a feed tied to a former employee’s bank login dies when their access is removed.

Fixing it in QuickBooks Online

Follow the order below. Each step is cheap, and most feeds come back at step one or two. Intuit’s help article on bank errors 102 and 105 covers the same sequence.

  1. Update manually. In Bank transactions, select Update. If the bank was briefly down, this alone fixes it.
  2. Check the bank’s website. Sign in directly. If there is a security alert, a new terms page, or a maintenance notice, clear it there first. QuickBooks cannot get past a page you have not clicked through.
  3. Wait a day. For errors 102 and 105, give the bank 24 to 48 hours. Retrying every hour does nothing.
  4. Try a private browser window. Cached logins cause a surprising share of stuck connections.
  5. Reconnect to the existing account. If nothing else works, disconnect the feed and connect it again. When QuickBooks asks which account to link, choose the account already in your chart of accounts. Creating a new one is the single most common way owners end up with two checking accounts and a year of duplicates.

Fixing it in Xero

Xero’s sequence is similar, per Xero Central’s bank connection guide. If transactions have stopped importing, the in-app banner offers Refresh bank feed; try that first. If the refresh fails, disconnect and reconnect the feed with the bank login of someone who will still be at the company next year. Check credentials, then try another supported browser. If it still fails, Xero support wants the bank name, the account name, and a screenshot.

Filling the gap without double-counting

Once the feed is back, look at the date of the last imported transaction and the date of the first new one. Everything in between is missing, and this is where DIY books go wrong. The safe routine:

  1. Download the missing period from the bank as a CSV or QBO file and import it into the same account.
  2. Check the first and last day of the gap against the feed. Overlaps create duplicates; delete or exclude the second copy, never both.
  3. Reconcile the account to the statement immediately. If the ending balance ties, the gap is closed. If it does not, the difference is usually a duplicate or a transaction the import dropped.
  4. Review bank rules before accepting the imported batch. Rules built for the feed can mis-categorize a manual import, and a mistaken rule applies to every line at once.

The reconciliation is not optional. A feed that was down for six weeks and then “caught up” is exactly how a business reaches year-end with a bank balance in the books that no statement supports. Our post on the monthly bookkeeping close shows where this check sits, and the free DIY monthly close checklist puts it on one page.

When a broken feed signals a bigger problem

Most of the time the feed is the whole story. Sometimes it is the first visible symptom of something else.

  • Two versions of the same account. If a past reconnect created a duplicate, one account has months of transactions and the other has the rest. Merge them with care, then reconcile from the last good statement.
  • The feed has been down for months. If nobody noticed, nobody was reconciling. That is a catch-up project, and it is better priced honestly than patched. Our guide to catch up bookkeeping cost explains what that involves.
  • Feeds break every month. Some banks simply connect badly. Switching the business account to a bank with a stable feed saves more time than any troubleshooting.
  • Balances never tie after a reconnect. Usually an opening balance entry created by the new connection. It needs to be found and removed, not adjusted around.

How Books LA handles this

We check every client’s feeds as part of the weekly routine, so an outage is caught within days rather than discovered at month-end. When a feed breaks we fix it, import the gap, reconcile the account, and note it in the close so nothing slips. If your feed has been down long enough that you are not sure where the books stand, a $495 bookkeeping review will tell you exactly what needs to happen. Our monthly packages include feed monitoring at every level.

Frequently asked questions

Why does my QuickBooks bank feed keep disconnecting?

Usually because the bank changed its login or security process, your password changed, or the authorization between the bank and QuickBooks expired. Some banks require re-authorization every few months. If it happens constantly with one bank, the bank’s connection is the weak link, not QuickBooks.

What do bank errors 102 and 105 mean in QuickBooks Online?

They mean QuickBooks could not reach your bank, usually because the bank’s site is down, under maintenance, or changed. Intuit’s guidance is to update manually, check the bank’s site, and wait 24 to 48 hours before reconnecting.

Will I lose transactions if I disconnect and reconnect my bank in QuickBooks?

No. Transactions already added to the books stay. You may need to import the gap between the last feed and the reconnect, and you must connect to the existing account in the chart of accounts, not a new one, to avoid duplicates.

How do I refresh a bank feed in Xero?

Use the Refresh bank feed prompt on the account. If that fails, disconnect the feed and reconnect it with current bank credentials. Then import any missing period and reconcile to the statement.

How far back can a bank feed pull transactions?

It depends on the bank; many connections bring in 90 days on first connect, some more. Anything older is imported manually from a bank download. Always reconcile the imported period to a statement.

Should I delete duplicate transactions from a reconnect?

Delete or exclude the duplicate copy, but only after confirming which one is already reconciled. Removing a reconciled transaction breaks the reconciliation. When in doubt, exclude the unreconciled copy and re-run the reconciliation.

Can a broken bank feed affect my taxes?

Indirectly. Missing months of transactions understate income or expenses, and a duplicate account overstates cash. Those errors flow into sales tax filings and the year-end package your CPA uses, which is why reconciling after every outage matters.

If a feed outage has left you unsure whether the books tie, book a short call and we will check the account with you.

About the author. Jelena Arkula founded Books LA, a bookkeeping firm in Santa Monica that works with small businesses across Los Angeles in QuickBooks Online and Xero. She writes about the rules that actually affect small businesses, in plain language, without the scare tactics. Books LA does not provide legal or income tax advice.

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