Flexible budgeting is a process where businesses create multiple budgets based on various levels of activity and revenue. This allows businesses to anticipate changes in the marketplace and develop a response strategy, so they can stay competitive. It offers the opportunity to adjust resources if the initial budget fails, meaning more resources can be reallocated without significantly impacting profits or production. Flexible budgeting also helps businesses identify waste and address areas where processes could be better managed, making it an invaluable tool for financial optimization.