Flexible budgets are essentially budgets that can be adjusted depending upon revenue and cost changes throughout the fiscal year, accounting for expected unpredictability. Companies first account for the fixed costs they expect, or at least costs that they don't expect to change as the year progresses. They then allow for fluctuating variable costs, reviewing costs periodically to make real-time adjustments. This allows for companies to accommodate its needs as factors change throughout the year, such as a high increase in demand for goods or services or a seasonal hike in labor costs. Flexible budgets demand a bit of imagination and require time spent accounting for hypotheticals, but they allow businesses to adapt to changing external factors.