I got the same error several times as I attempted to log in as the sa user using the usual password I use on test systems. I opened SQL Server Management Studio and tried logging in as sa:
Well, being unable to access SQL Server via sa I changed the login to Windows Authentication and was able to log in that way (I was logged into Windows under the same account used to install SQL).
I right clicked on the server name and selected Properties. In the Server Properties I selected the Security tab in the navigation pane and checked the Server authentication setting:
When installing SQL Server for use with Microsoft Dynamics GP you need to have it installed using SQL Server and Windows Authentication mode.
The first step to resolving this is to change the setting and save the server properties.
After this open under the SQL Server Security select the sa acount click edit the properties:
As you can see in the above screenshot, the account is disabled. I changed the setting to Enabled and saved the change and was then able to log into GP Utilities without any more issues.