Flexible budgeting is a financial planning tool that adjusts budgeted amounts based on actual activity levels. Unlike a fixed budget, which remains constant regardless of changes in business activity, a flexible budget allows organizations to modify their budgeted revenues and expenses according to real-time performance. This adaptability helps businesses better manage their resources and make informed decisions. By using a flexible budget, companies can analyze variances between expected and actual results more effectively. This analysis helps identify areas where performance may be lacking or exceeding expectations, allowing for timely adjustments. Overall, flexible budgeting enhances financial control and supports strategic planning.