What is a flexible budget?

A flexible budget is one that can flex or adjust as needs change, as noted by Accounting Coach. This type of budget differs from a static budget that remains at the same amount regardless of changing needs.

The flexible budget allows departments to have access to needed cash when sales or production are increased. For instance, this type of budget may make a certain percentage of money available to a particular department if that department's revenues increase by a specific number. A flexible budget might have room for 5 percent more money to be routed to a department when the revenue of that department increases by 5 percent, for example.