Using squid proxy on Linux to monitor and control internet usage in a network

NOTE: This is just a rough research note for now - I haven't done this myself yet. Will expand once I have experimented more with this. Till then, please use the following info to build upon, and let me know via the Comments box below if you have any quick doubts. Cheers!

Here is a small outline of stuff one of my friends did to achieve the same using squid at our bangalore office - this outline might be of help when you start reading the full articles below:
http://shyjug.blogspot.in/2008/09/squid-proxy-server-on-linux-rhel5.html
http://shyjug.blogspot.in/2008/09/how-to-share-internet-using-proxy_21.html
http://shyjug.blogspot.in/2008/09/how-to-ckeck-squid-logs-in-real-time.html
http://shyjug.blogspot.in/2008/09/how-to-block-web-sites-using-squid.html

And here are some full articles:
http://www.thegeekstuff.com/2010/09/squid-control-internet-access/
http://hubpages.com/hub/Monitoring-Internet-Usage-With-LightSquid-and-pf...
http://cottagedata.com/security/squid/squid.html?book_num=4&chapter_num=1
http://www.howtoforge.com/web-filtering-on-squid-proxy
https://calomel.org/squid.html

I would then recommend setting the modem to allow traffic only from the proxy server, so that other machines would have to connect to the proxy server to get internet.