Savings of up to £1 billion can be found among police forces in England and Wales before officer numbers have to be cut, three watchdogs have found.
The Audit Commission, HM Inspectorate of Constabulary and the Wales Audit Office issued a joint report stating that 12% of central government funding could be saved without reducing police availability.
It suggested greater cooperation between police forces, closer matching of crime with the number of officers on duty and better procurement could all cut costs.
Part of the problem, the report suggests, is some police forces are acting much more slowly to make changes than others.
"The challenge for the police service is to reduce spending without reducing public confidence," HM chief inspector of constabulary Sir Denis O'Connor said.
"Our reports show that whilst some forces are getting ready for the budget cuts we know are inevitable, many forces have yet to make adequate preparations.
"We are today challenging the police, managers and politicians who make strategic decisions about the future of policing in England and Wales, to use our reports to examine their choices thoroughly so that the public's safety and well-being are not put at risk."
The Home Office, like all other government departments, is facing having to make annual spending cuts of 25%.
This is double the level set by today's report, suggesting the watchdogs believe this level of budget reductions will lead to cuts.
"Police forces will need strong leadership from politicians, police authorities and chief constables if they are to save money without reducing service to the public," Audit Commission chair Michael O'Higgins commented.
"Better value for money in policing will be a challenge, but it is possible."
Policing minister Nick Herbert recently admitted that the spending settlement would be "very tough" but has committed to seeking to drive out costs wherever possible.
The Association of Chief Police Officers' president, Sir Hugh Orde, recently described reductions in overall police numbers in the coming years as "inevitable".
Funding for the police has risen to £13.7 billion in 2008/09, nearly 50% more than in 1997/98.