RealTorch › The 15 Functions › Finance
Function 08 of 15Finance
Finance looks forward. Accounting tells you what happened; Finance tells you what you can survive.
Finance manages capital, funding sources, risk and resource allocation. The knowledge base draws the line with Accounting sharply: Finance looks forward to anticipate needs and manage risk, Accounting looks backward to record and analyse. Both are necessary; confusing them is how builders end up with immaculate financials and no borrowing capacity in March.
Capital is one of the five key constraints, and it binds in a specific way for builders: it is consumed by standing inventory long before it shows up in a profit number. The eight major activities run from validating the strategic plan and managing bank relationships to structuring private equity and analysing risk — and the risk work is where expected-value thinking earns its keep, because a builder's worst outcomes are rarely the most likely ones.
Forward, not backward
Finance's product is a decision about the future. If it is reporting on the past, that's Accounting.
Capital binds through inventory
Specs and land eat the facility. Profit on paper doesn't fund a draw.
Price the risk, don't avoid it
Expected value across outcomes beats a gut read of the worst one.
The bank is a relationship
Covenant conversations go better before the covenant, and that is a Finance job.
Atlas in action
A spec strategy meets the cash curve that has to carry it.
Four you can carry. Eight leaves you $1.4M short in March.
At your current absorption of 3.1 spec sales a month and an average 141-day build, eight standing specs peaks working capital in March at $6.9M against a $5.5M facility — a $1.4M gap for roughly seven weeks. Five is the honest ceiling if nothing sells slower than plan; four leaves room for one home to sit. The carrying cost nobody prices at the meeting: each additional standing spec costs about $3,850 a month in interest, insurance and maintenance, so specs 5 through 8 cost $61,600 over a four-month spring if they close on time.
| Standing specs | Peak capital | vs facility | Read |
|---|---|---|---|
| 4 | $4.6M | $0.9M headroom | SAFE |
| 5 | $5.2M | $0.3M headroom | TIGHT |
| 6 | $5.8M | $0.3M short | BREACH |
| 8 | $6.9M | $1.4M short | BREACH |
Composite example. The useful output isn't “no” — it's the number of specs that fits, and what each one past that costs per month.
The plan and the facility have to be looked at together
Atlas models the cash curve against your real absorption and build times, so the spec conversation happens with a number instead of an instinct.
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