Creating many flags from scratch for large scenarios can take a while. The in game editor is good enough for it, but some might have a preference for other software, like Photoshop, Aseprite, Paint or Gimp.
This guide will help you how to paint flags in those
Setting up
Let's say you have a scenario without any flags. In the image above I have only painted one for Denmark in game. When the game saves a scenario or save, it will only create the flags image file for nations with painted flags, so in this case it would only have Denmark.
We want the game to create flags for all nations (even if we later decide to leave some without flags)
1. Press the Fill All Flags -button. It will populate every nation's flag with a random color.
(as of v4.0.1 the flag counter will show 1 extra flag over the max, but you can ignore that)
2. Save the scenario
3. Go to the file location where the scenario is saved.
The exact path for your scenario files can be found in the main menu scenario list info button. But for example for windows it will be inside your user folder, then AppData\LocalLow\JoySparkGames\Ages of Conflict\
4. Once you locate the correct scenario folder and open it, you should find the scenario file itself, the flags.png file, and a flagNames.txt file.
Editing the files
You will need to edit the flags.png file. The file dimensions can't be changed, so you can't just replace this file with another unless it has the exact same dimensions.
The flagNames.txt is just there for help, and changing or deleting it won't effect the scenario in any way, but better to keep it unedited.
Open the flags.png file in your preferred drawing program. I myself use Aseprite, but it isn't completely free so use whatever you have. Also open the flagNames.txt file, as it will tell you in which position each flag should be.
The flags in the image file will be ordered in columns of 10 flags, starting from the bottom left, so flag #10 will be the top left corner, and #11 will be second flag in the bottom row.
To make painting easier, I suggest using an overlaid grid if your program supports it. I prefer to use a 6 wide, 4 tall grid, to allow for easy tricolors and more.
Finishing up
If you decide that some nations don't need flags, you should leave those as they are. I don't recommend just making their flags transparent, as that won't actually leave them without a flag, just a transparent one.
To remove any nations' flags, you will need to do this later in game. So once you are happy with your flags, you can save the flags.png file and open the scenario in game again. (You will need to restart/return to menu again for the changes to register). Edit the scenario and remove any unwanted flags with the Clear Flag button in the Flag painter.
Now, if you save the scenario, those flags will be removed from the canvas file. FlagNames file will also be updated, with those nations not being in there anymore.