Zuora’s new product helps companies collect money from customers

Zuora, a startup that offers software to manage customer subscriptions, just announced its second product, dubbed “Z-Payments.” While Zuora’s first product, Z-Billing, automates the billing process (duh), Z-Payments handles the other side of the equation — actually allowing customers to pay those bills, including integration with online payment service PayPal.

The product addresses a common complaint among Zuora customers, says chief executive Tien Tzuo — billing customers isn’t always enough. There are always people who don’t pay, or payments that don’t go through, and companies often lack the staff to deal with every one of those problems.

“The net effect is they end up not collecting all the money they can collect,” Tzuo says.

That’s where Z-Payments comes in. It manages not just the act of getting paid, but also all the issues that can pop up surrounding payments. So a company can use Z-Payments to notify their customers when their credit cards are are about to expire, or send out suspension warnings when customers fail to pay. It’s all customizable, Tzuo says, allowing each company to offer its own payment terms, and to set its own penalties for non-payment. The product has already been tested out by helping storage startup Box.net and Facebook application Teach the People handle their subscriptions and payments.

Before founding Redwood City, Calif.-based Zuora, Tzuo spent nine years at Salesforce.com, and he left with Salesforce chief executive’s Marc Benioff’s blessing — in fact, Benioff invested in Zuora. Like Salesforce, Zuora delivers its service through an online subscription, i.e. through the software-as-a-service business model, making it cheaper and easier to set up than the established solution from Portal Software.

The new product sounds like a smart step towards Tzuo’s goal of turning his company into the primary “online subscription platform,” in the same way that PayPal is the platform for online payments, and Google is the platform for online ads. It also gives Zuora an advantage over Aria, another company that offers to automate subscriptions and billing through a SaaS model. Z-Payments will be available for free to Z-Billing customers, and as a standalone product with a base price of $500 per month.

Zuora launched earlier this year and has since signed up more than 40 customers. It raised $6.5 million from Benchmark Capital and from Benioff. Tzuo says the company has plans for other products and features to make handling subscriptions easier, and is also developing a module for Salesforce’s Force.com platform.