Flexible Budgeting

Flexible budgeting is a financial planning tool that adjusts the budgeted amounts based on actual activity levels, such as sales or production volume. Unlike a fixed budget, which remains static regardless of changes in circumstances, a flexible budget provides a more accurate picture of financial performance by accounting for variations. For example, if a business sells more products than expected, a flexible budget would show increased revenues and corresponding costs. This helps organizations make better decisions, manage resources effectively, and evaluate how well they are performing against their goals in real-time.