A Customized Accounting Approach for Law Firms with Jessica Gonifas, CPA

There tends to be a lack of confidence around the finance side of running a law firm, and many lawyers often find themselves floundering when it comes to their books. Whether you feel like you “should” know certain things about your numbers, find yourself spinning in emotional baggage around money, or have just never found the right fit when it comes to your accountant, listen in.

This week, Melissa had the pleasure of speaking to Jessica Gonifas, the owner of Silver Peaks Accounting Services. Jessica cares deeply about creating a customized approach for each client she works with, and her mission is to help law firms reach their personal wealth goals by personalizing their path to success.

Tune in this week to hear Jessica’s insights on finding the right partner for your firm, and why acknowledging the uniqueness of each business is a critical piece of her work. You’ll hear how too many lawyers stay stuck around their numbers, why you might be in a rut with your books, and her advice for taking small steps toward clarity and finding a trusted person for your team.

If you’re a law firm owner, Mastery Group is the way for you to work with Melissa. This program consists of quarterly strategic planning facilitated with guidance and community every step of the way. Enrollment will be opening soon, so join the waitlist right now to grab one of the limited seats!

What You’ll Discover:

• Why it’s important that your accountant or fractional CFO is a partner in growing your firm.

• Jessica’s tips for finding the right partner for your firm.

• The value of sharing your doubts and worries with your accountant. 

• Why so many lawyers find themselves floundering with the finance side of business.

• The smallest step you can take that will give you clarity. 

• What it looks like to have a trusted person on your team.

• Jessica’s thoughts on what constitutes a healthy profit margin. 

• How you might be stunting your law firm’s growth.

Featured on the Show:

• Create space, mindset, and concrete plans for growth. Start here: Velocity Work Monday Map.

• Join Mastery Group

• Join the waitlist for our next Monday Map Accelerator, a 5-day virtual deep-dive event.

• Silver Peaks Accounting Services: Website | LinkedIn | Facebook | YouTube

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Leave me a review in Apple Podcasts or anywhere else you listen!

I’m Melissa Shanahan, and this is The Law Firm Owner PodcastEpisode #219.

Welcome to The Law Firm Owner Podcast powered by VelocityWork for owners who want to grow a firm that gives them the life they want.Get crystal clear on where you're going. Take planning seriously and honor yourplan like a pro. This is the work that creates Velocity.

Everyone, welcome to this week's episode. I had the pleasure tohave a conversation recently with Jessica Gonifas, she owns Silver PeaksAccounting Services, and does fractional CFO work for law firm owners. We had areally great conversation, and what I learned is that we think a lot alikeabout things, and her expertise and her background is really special for thefirms that she has the opportunity to work with.

I always enjoy sitting down and meeting new, especially women, inthis space, who are full of integrity and care deeply about a customizedapproach for each client that she works with as a fractional CFO. I mean, thevalue in that is immense. I think in this episode, we talked about this, maybeit was offline. But we share a mutual hatred for a prescriptive nature when itcomes to working with law firm owners.

Every business is unique. Every owner has different desires andoutcomes that they are looking for and listening to those and helping them beon the path for those is really important. So anyway, it feels like we are veryaligned in many of the ways that we think. We have all the places that shelives on the internet in the show notes, so please go check her out. I hope youenjoy this episode, this conversation, with Jessica Gonifas.

Melissa Shanahan: Hi, everyone. Welcome to this week's episode. Iam thrilled to have Jessica Gonifas of Silver Peaks Accounting today on thepodcast. Hi.

Jessica Gonifas: Hey there. Thanks for having me.

Melissa: Oh, my gosh, welcome to the show. I am thrilled tointroduce people to you and talk through something that's really common and Ithink a lot of people deal with, or certainly can identify with. I guess beforewe get into the meat of it, will you share with everyone who you are, where youare and what you do?

Jessica: Yeah, so I am a CPA, and I'm in Colorado. We serveclients all over the country, so that is not limiting for us. We have clientsin most states. I've had my firm for about five years, and we focus on lawfirms. The majority of our clients are small-to-medium sized law firms, and we helpwith the accounting and fractional CFO. Both pieces are super important thatyou have accurate accounting.

My background is in financial reporting, so I am a stickler foraccurate financials, it's a big deal for us. I've also worked in the CFO role,so I have been able to use my experience at much larger companies to help smallbusiness have that much higher-level C-suite type partnership and help themgrow their firms where they want to go.

Melissa: In talking to you before the recording what I havelearned about you is you’re a stickler for accuracy, which makes my heart sing.That's so great. Through talking to you, and we'll get into this, but you and Iare the same in the belief that with anything, not just finances, there is nota set blueprint that people should abide by to, like their equation to success.

It really does need to be looked at individually. You care aboutthat, which is really important. I don't think it's done enough, at least withthe clients that we work with. I think, oftentimes, even if the accountant hasthat same belief, they don't take the time to actually customize and get toknow the client and figure out what their equation is. I don't know if “equation”is the right word, but just like, their set path should be unique to them.

Yeah, I think that's really great. So, I'm pumped to have youhere. It feels like it might be best to start the conversation around this ideathat there tends to be a lack of confidence when it comes to the accountingside of things or the finance side of things for the business because that'snot what lawyers went to school for; they find themselves with their ownbusiness and they have a whole bunch of things to look at.

I would love to hear what you see from that angle. I think justkind of open up the discussion and normalize the fact that it's okay that theydon't have all the answers on that side. Then we could talk about what theyneed to do to in order to get their answers. What's your experience with that?

Jessica: Yeah, I've seen a lot of things, right? So, I like toequate myself on some level to a doctor, right? The doctors have got to knowwhat the symptoms are. The doctor needs to know what the problems are. And youhave to feel super comfortable with that person.

So, I know that accountants typically can be a little cold andmaybe standoffish, is kind of how the stereotypical accountant is, and thatdoesn't facilitate an open dialogue, right? When we're working with theclients, if you have a question on your financials, we want you to ask. We wantto help you learn. We also like a second set of eyes, right? We're not perfect,we do make mistakes.

If something doesn't look right to you or you have a question, youabsolutely need to be asking. I know that is not a philosophy of someprofessionals in my field. If you feel like you can't ask, then you need tomove on. Your accountant, whether it's fractional CFO, or monthly accounting,needs to be your partner, and helping you grow your firm.

I have heard a lot of potential clients say, “Well, this gal isn'tgreat, but she was better than the last one that stole from me, or totallyscrewed up my books. So, we just kind of put up with her.” Well, that's notconducive to growing your law firm, right?

You need to find somebody that you fit with. We have a call, it'sa 15-minute call, to see if you're even a fit with us. I have to fit with youas well, because we have an ongoing partnership. So, I need to make sure thatyou're the kind of person that I'm going to like working with. I want you toenjoy getting on the calls with me, and look forward to talking about yourfinances, and I look forward to getting the financials every month. That ispossible.

I just think that so many people are in this rut with theiraccounting software, and they just put up with it. Or even in some cases, theyjust do it themselves because they can't trust anybody else. There aredefinitely better options out there for you.

Melissa: Yeah, yeah. You brought up a point also, before recording,that sometimes, just because of our ego or whatever, we don't want to askcertain questions. We want to just kind of roll along with what we see. Like, “Oh,yep. Okay. Okay.” Getting to the place where you're willing to ask a questionand maybe sound dumb, but you just need to, you just want, to understand. That'simportant.

It does take the right relationship to feel like it's safe enoughto ask questions that you “should” know the answers to; which I don't thinkthat's true, that you should know the answers these things. We haven't beentrained in these things, right? And so, I hear what you're saying.

If it's not a good fit with the accountant, where the person feelscomfortable enough to dig in and be educated in ways that they haven't prior...Yeah, super important. You mentioned this, and several episodes ago I had aclient on the podcast, and she's also an accountant.

We were actually talking about one specific thing when it comes toadvanced client costs and how they're handled. Hers is handled poorly, and sowe went into that. But we started talking about the relationship with youraccountant, and how important it is to have someone great on your side and how,often, people don't.

Sometimes they're doing it on their own, if they're early enough,and they carry that over a little too far. Sometimes they have someone but therelationship feels pretty sterile. So, one question I have for you, and maybeit's before the business is being set up, in your opinion, when should someonefind that right partner? How early, when they start their firm?

Jessica: I say, right away. I know when we're starting ourbusinesses… I've been in the same thing, I built this from nothing…. we want tobootstrap things and we're just focused on replacing our salary so we can feedour family. So, costs may seem unnecessary at the beginning.

I've heard people say, “Well, how hard is it? It's just QuickBooksOnline.” Well, it is kind of difficult. It's not the day to day, it's thebigger things like advanced client cost, or the trust fund. Oh, my gosh, wecould do an entire episode on the trust fund.

We had one client that I think they were probably around $3million a year in revenue, and they'd never really had a good accountant. They'dprobably had them for six or seven years, and it was a mess. It was really ahuge mess. They were trying, they had some different people, but it didn'twork. They paid us tens of thousands of dollars to fix it.

So, that is a scenario that you can get yourself into if you'renot aggressive enough and assertive enough to find the right person. I don'thave a crystal ball, if you give me your books and they’re a mess, it's notlike I just wave my magic wand and I get it figured out in a month. But yourperson needs to be making progress, and you need to feel comfortable with thatprogress. And in the case, I just mentioned, they had a lot of red flags forseveral months, but they just kind of let it keep going.

So, I say from the beginning, it's an overhead cost that we justdon't love to have in our business. But in the long run, it's going to get youso much further along. And if you're not in the beginning, and you're like, “Ugh,this isn't right. My trust account, I know, I don't feel good about this. Idon't feel good about some things,” you've got to make a change.

Every single potential new client call that I've had, that hastold me, “I feel like something's not right with my books, but I don't reallycan't put my finger on it,” they're right. Their gut is telling them something,and they need to listen to it. And if you ignore it for too long, you're goingto have yourself in a massive issue.

Melissa: Yeah. You know, it's interesting, you're talking aboutthat $3 million firm where you had to clean everything up, it's crazy how “successful,”… how much money you can make and be a hot mess. I think I always thought…naive, former Melissa, used to think that, “Well, if you're making that much,you've got your ducks in a row.” And that is just not the case some of the time.

Jessica:  Well, in thatcase, and this has happened before too with other clients, I’ll have folks cometo me looking for fractional CFO. They'll realize, “Hey, I’m at $2 million ayear, and I'm kind of stuck. I need help getting past that. I know, I need tounderstand my numbers better.” Or I hear this one almost all the time, “Myadvertising expenses are too high. I don't know what everyone's spending allthis money on.”

So, a lot of times they come to us for the CFO side and more ofthat strategic financial partnership. And the first thing I do, of course, islook at the books because as the fractional CFO, it's my responsibility toensure the books are accurate. Those are some uncomfortable meetings, “Hey,this is not working. This is a mess. We can't even do anything until we get thebooks straightened out.”

A lot of times, they're like, “Well, yeah, I kind of have someissues. I wasn't really sure.” And so, there's no problem that we can't solve,either.

Melissa: Yeah. Which is so great. I think I love that aboutnumbers. Like, to get to the truth.

Jessica: Right. I know. It might take a while.

Melissa: Yeah, exactly. So, it struck me, I have heard you talkabout a lack of confidence that people… it's easy to have a lack of confidencein this area. And it's easy to make money and still have that sort of be a grayarea. And so, I think it can be tough to pull people's attention enough to say,“Okay, I'm going to go deal with this.”

Because they're growing, they're getting busier, and this there'sthis thing over here, their finances that they're not totally clear about. Butthe one thing that I wrote down, as you and I were talking prior about thislack of clarity, is because there's oftentimes a fear of digging in. A fear ofmaybe what they’ll find. A fear that it's going to be a mess. A fear that it'sgoing to take a lot longer and suck bandwidth that they don't have. A fear ofwho they choose, because they don't know a good partner.

It's like all these barriers are barriers…. But what I wrote downwas, it has to start with a decision to get clear. And if they just make thedecision, then it's one foot in front of the next. They can talk to differentprofessionals. I think that you should be at the top of people's list to talkto, just to start to educate themselves and create clarity. Not that they haveto be the ones to fix it all.

I don't know if you have anything anecdotal, or if you just haveanything to offer. Because maybe, what you say is enough to pull someone out ofthat driving forward state to get them say, “Wait a minute, let's go.”

Jessica: You know, there's nothing I haven't seen. So, whetherit's$2 million sitting in the checking account, and they're too scared to hireanother person, or do a distribution or whatever. I mean, I've seen that sideof it. I've also seen the side where they're using personal credit cards to payfor my expenses.

So, maybe their firm is doing great, but they have a 100 grand ofstudent loans and that keeps them up at night. That they don't really know howto balance taking extra money out of the firm to pay for that. Maybe they don'thave cash reserves. Maybe they had a massive cash crunch last fall, and theydon't want that to happen again.

There's nothing I haven't seen in business. My own father had asmall business, when I was in college, that failed. It just was the mostdevastating thing to ever see anybody go through. So, I've even personally seenthat side of it in my family. I mean, I do think of my clients as family. So,when you come to me, I need to know what's happening. I need to know what's keepingyou up at night.

We actually talk about that on our first call because I need toknow if I can help you. I think part of it is just verbalizing it to somebodythat has seen this before probably, or is not going to be judgmental. That'sjust how I am. I've had some crappy things happen in my life; some crappythings with money, crappy things with husbands, all of the things.

So, to me, it doesn't matter what it is, we're going to workthrough it. I have a video testimonial with a client. I didn't ask her to saythis, but she said, “Hey, one of the things on your first call was I reallyfelt like you weren't judgmental.” Honestly, she really wasn't in a bad place.

She said, “If I would have felt like that, I wouldn't have hiredyou.” And so, that was kind of some actual validation, because that is how Itry to show up for folks. And really, at the end of the day, we're futurefocused. So, what are the issues? What are the problems? What's keeping you upat night? But we're going to focus on the future, and we're going to get rid ofthat, and we're going to fix it.

Melissa: Yeah, yeah, definitely.

Jessica: Unlike a lot of accountants, traditionally, who are veryhistorically focused, right? That's just how we are. That's how we're trained.That's what our makeup is. I tend to be very future focused. That's part of thereason I excelled in the CFO role, when I was a CFO. I need to know thehistory, right? I need to know the numbers; I want to say a couple of years ofhistorical numbers, so I can sort through the story of what the numbers aretelling us.

But that's only part of it, right? Like, do you, as a client, knowwhere are you wanting to go? What happened? And then, of course, the futurefocus is, what's your vision for your firm in your life? We're going to makethe numbers work for you.

Melissa: Yeah. Yeah, absolutely. I'm just thinking of thelisteners right now. If someone finds themselves in a spot where maybe they'resuper successful in terms of revenue, but they don't have a lot of answers forwhat's going on, on the financial side, what's the smallest step they can taketo just get themselves on a path that's going to create a lot of clarity? Maybethat's just to decide to make a phone call.

Jessica: Yeah. Of course, I'd love to chat with them. But ask forrecommendations or whatever. Find a couple of folks to chat with. I think mostof us do kind of introductory calls; I do an hour. We have a process where youmeet with one of our team for about 15 minutes to do some very initialscreening. And then, you meet with me for an hour and I just ask you questionsthe whole hour.

I've had some folks leave that hour, and they didn't pay meanything, we just talked, saying, “Wow, I already understand better what myproblems are and where to go. Now I need your help to fix them.” But I ask whatyour vision is for your firm, and that's a discussion that most people havenever even had or even thought of. And so, what's the vision? And how are wegoing to structure the firm’s finances to help you accomplish that?

Melissa: Yeah, totally. You mentioned when people come out of lawschool, or when they start their firm, they can find themselves flounderingwith the finance side. I was asking you, why do you think they flounder? Whatis that? And really, it kind of came back to the same thing.

They know that there's issues, they feel stress on that side, theyalso don't have the answers. And so, that's what can cause that. And one thingyou mentioned, was that they really don't have any systems in place, becauseit's not their training.

And so, I think that's a word that probably brings comfort. Yes,they have you as a trusted person, but just understanding that a trusted personshould implement or institute systems that will serve them and where they wantto go to towards their vision, all of that. I don't know if you want to sayanything about what that looks like? Or give people a picture of an idea ofwhat that means?

Jessica: Yeah, I think we have a lot of emotional baggagesurrounding money, and history of something our dad said to us, or grandpa orwhatever. And we bring all of that baggage into our business, and it's veryemotional. There are a lot of emotions tied to money.

Money can mean a lot of things in our society. It can mean successor lack of success. It's hard for that not to get wrapped up in your business,right? So, we do talk about revenue a lot, and revenue is important, butrevenue’s a sexy number, right? I don't care how much you're making if you haveno profit. But if you don't know if you have any profit, then you've got awhole other problem, right?

So, you can go to all the Bar Association dinners and talk aboutyour $5 million firm, but if you have no profit, then... But I think it's thesystem's that helped take the emotions out for us. And when we talk about afinancial system, I'm not talking about QuickBooks or an accounting software.I'm talking about what you do with the money outside of the accountingfunction, right?

One of the things that new firm owners struggle with, and probablyon half my calls I get this, “I had to pay a bunch of taxes, and I had no ideaI had to pay that much.” So, we have a system where we set aside, we suggestyou set aside a percentage of your profit every month in a separate accountthat you don't even touch. Then your taxes are no big deal.

That's a system to help you have less stress surrounding money. Becausewe all have the tax person calling in April, and because we're small business,most of our taxes don't come out of our paycheck. So, we have to have a systemin place to take that fear and that stress out.

That impacts how you show up for your clients and your potentialclients and your family and your staff, if you have that hanging over you. Ican guarantee you, 100%, it's impacting the way you're showing up in yourbusiness and all other areas.

Melissa: Yep. I have a couple of random questions that, I mean,we'll see if you have an opinion. I'm sure you probably do. Is there ever areason to not pay payroll twice a month, and instead do it every other week?Like, I know that people can do either. But is there a reason that you wouldnot just do it twice a month?

Jessica: It’s just preference. Our clients are probably half andhalf. We do payroll, too. But it's really just a preference on the way thatthey've set it up. Now, for me, for budgeting purposes, I like it twice amonth. It does kind of screw up your financials twice a year where you havethose three pay periods, and it is easier for benefit calculations and thatstuff. But at the end of the day, you're paying on the same amount.

Melissa: Right. But it is it just seems easier, morestraightforward on the back end, if it's twice a month. Is that true?

Jessica: Yeah, it is. I just think that, I don't know when, atsome point, people did the biweekly thing, but it's like half and half. If youwere brand new to me and said, “Hey, I want to do payroll. When should I do it?”I would say do it on the 15th. I know some employees like the third paychecks,because they consider it a little bit of a bonus for themselves, and with theirfinancial planning and stuff but…

Melissa: Okay. I was curious if you had… Because I cannot find agood reason for three times a month. I mean, if it's that way, and it's not anissue…

Jessica: From a cash flow perspective, you're paying a little bit lessevery two weeks, and then you kind of get that catch up, on that third payroll,when that hits. So, maybe that could be a reason. But at the end of the day,you're paying the same thing anyway.

Melissa: Cash flow... I think there's certain times… I mean,hopefully, it's just not really an issue if that were to happen. But there arecertain times, for whatever reason, that people are in cash crunches, and thenit happens to be in what was June this year. It's stressful. And they didn'tmake the decision for every other week. At some point, some decision was made,and they didn't do it consciously. So, I was curious.

Okay. The other thing I was going to ask, I hear people ask this alot. I hear them ask their accountants. I hear them ask me, and I don't have astraight answer. I can tell you the answer I give, which doesn't feel helpfuloftentimes to them. But when it comes to profit margin, it depends on the firm,depends on a lot of things, like, are they virtual? Are they not virtual? Thatkind of thing.

But what would you say is a healthy range for profit margin for atypical firm? Which I don't even know, that feels like terrible language touse. But what do you have to say about that? Maybe you can fix my question tobe something that's easier to answer.

Jessica: Yeah. Basically, from a general business perspective, a25% profit margin is healthy. As a business owner, a small business owner, andthis gets a little wacko, because we're not corporations like Apple orwhatever, but you should be making a wage that is close to what you would bemaking if you're doing this somewhere else. You should be getting a return onyour equity.

So, where the return on equity comes from is in that profit piece.If you're S-Corp, which most people are, you should be taking a wage, and thenthe return on equity comes from the profit margin. So, to have a healthy businessthat should be around 25%. Fifteen percent is kind of a minimum for a businessthat’s going to be around in several years. But the 25% is good. That's what wework with our clients.

We don't just say that you're not at 25% or 35%, so we’ve got tocut costs. We want to have a strategy. Sometimes there's a strategy that maybewe're building staff this year, and our profit margin may be a little bit lowerthis year. Because we're building some of that infrastructure, in thatfoundation around staffing. We know, maybe, we're hiring three brand newattorneys, and they're not going to be billing at three or four times theirsalary.

But that's a strategic decision that you made. And we know whatthat's going to do to the numbers before you make that decision. So, most ofour clients are in the 30s, and that's a wide range of different types ofpractice areas.

We do have one client that was fine at 10% or 15% because hewanted to be overstaffed. He didn't want to start stressed out. He wanted toreally deliver white glove service to his clients, and have those attorneysavailable when they needed to be. But that was a strategic decision he made, andthat's how he wanted to run his firm.

Melissa: Yeah. Just for kicks and giggles, of all your clients,what’s the highest profit margin someone has?

Jessica: I have one a 45%.

Melissa: Okay. Yeah. Nice. That's great. I figured people would becurious about that. Since you mentioned expenses, you said something before wepushed record, which was, you have to help people sometimes understand thatthey have to stop obsessing over expenses, and focus on revenue. I loved that,because I think people get in a rut with thinking and constricting down.

While you mentioned it's important to always watch the expenses,of course, but the focus needs to be on generating business and generatingrevenue.

Jessica: Absolutely. So, we look at the expenses. I have somebenchmarks on some overhead and those things. We look at how you're fitting inwith that, then we talk about strategy. And we talk about changes that you maywant to make. So, the two that I hear, from pretty much every client, areadvertising and office supply. And so, we look at some strategies to make surethose costs are reasonable. And we set a budget, right?

So, if you have a marketing person that's in charge of yourmarketing program, and you're like, “I don't know what they're spending allthis money on,” well, we set a budget, and they have to stick in the budget. Wecould talk about tracking marketing effectiveness and all that stuff, butbasically, it's setting that budget and setting that fence.

Again, that's a process that you need to have, and a system in place,that if your advertising person is over budget, then you need to be checkinghow effective that advertising is, and then we'll make modifications. Butgenerally speaking, we set the budget, look at the strategy on the expense side,and then you need to move on. You need to check it every month to make sureyou're in budget.

But as the owner and the CEO and the rainmaker of your law firm,you need to be obsessed over the revenue side. The expenses will happen. Andthat's part of what our clients have me for, I'm watching them also, andalerting you to any red flags. But at the end of the day, if that's the focus…

I've seen it happen. I had a client who was obsessed on theexpenses, he was cutting every single penny that he could cut. We talked aboutit every single month. His firm didn't grow at all, even though he was workingon the revenue. He said he was obsessed with the expense side, and it juststunted his growth.

It's money mindset. So, are you focused on scarcity or abundance?Focusing on the expenses is scarcity. Focusing on revenue is abundance.

Melissa: Yeah, absolutely. That is great. Man, okay, well, weshould have you back, if you're willing. We could just dig into topics. Likeyou mentioned, we could do a whole episode on trust accounting. I think that'dbe super cool. I don't hear podcast episodes out there specifically to do withthat. I think that's a topic many people will be interested in, hearing whatsomeone like you has to say.

Jessica: It’s a big deal.

Mellissa: So yeah, if you will have us, come back on the show.

Jessica: It’s a big nagging thing that a lot of clients have, “Idon't really know if my trust is right. Nobody's right. I'm not confident.”Again, it's just all about systems.

Melissa: Yeah. Great. Thank you for coming on. This is a good intro.I feel like it would be great to have you on more.

Jessica: Awesome. I'd love to come back.

Hey, you may not know this, but there's a free guide for a processI teach called Monday Map/ Friday Wrap. If you go to velocitywork.com, it's allyours. It's about how to plan your time and honor your plans. So, that weekover week, more work that moves the needle is getting done in less time. Go tovelocitywork.com to get your free copy.

Thank you for listening to The Law Firm Owner Podcast. Ifyou're ready to get clearer on your vision, data, and mindset, then head overto velocitywork.com where you can plug in to Quarterly Strategic Planning, withaccountability and coaching in between. This is the work that creates Velocity.

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