Internal reporting at a local internet service provider : a case study

Abstract

This dissertation will explore and evaluate the internal reporting (cost and management accounting) practices used by Waldonet Ltd, a local medium-sized Internet Service Provider (ISP) in depth. It is a qualitative study, supported by relevant data gathered from interviews held with Mr. Marc Vella Bonanno, Senior Accounts Executive at Waldonet. From the interviews held, it appears that the internal reporting system is particularly influenced by external factors. The high level of competitiveness among ISPs and the presence of a rapidly changing factor as is technology make the JSP sector one with a high level of uncertainty. Due to the high level of competitiveness, Waldonet's main objective is cost control. Budgets and variances are prepared mainly to control costs. Furthermore, since prices for Internet and related services are set by the market, Waldonet's challenging objective is that of limiting service costs below the market price. The internal reporting system assists in the monitoring and control of costs. An important recent modification helping better monitoring and control of service costs was definitely the introduction of Activity Based Costing (ABC) principles. ABC guarantees a more reliable estimation of resources consumed by services. Despite the quest for cost leadership, Waldonet also tries to follow a differentiation strategy. Such differentiation is obtained by means of superior support offered to customers and an element of target marketing practice. In past years, changes in the internal reporting system were a reflection of changes that the firm itself was undergoing. It may be predicted that in future the internal reporting system will also change and develop according to changes in external factors.