What an Electronic Document Signature Is and How it Works

March 7th, 2023

Do you know how electronic document signatures work? More and more companies are using electronic signatures in their documents, and it’s especially useful in contract lifecycle management (CLM). 

Before you embrace electronic document signing, it helps to know what it is, how it works, and how it can benefit your organization. 

Key Takeaways

• Electronic document signatures enable electronic documents to be signed without handwritten signatures.

• Electronic document signing works on any touchscreen device or by typing your name into an eSignature app using a special handwriting-like font.

• Electronic signatures benefit electronic contracts by speeding up execution, minimizing repetitive signing, enabling remote signing, and reducing errors.

• Electronic document signing helps the environment, improves document security, saves money, and makes the whole process easier.

What Is an Electronic Document Signature?

An electronic document signature, sometimes called an e-signature or eSignature, is a way to sign documents electronically. They are a fast, efficient, and completely legal way to replace traditional handwritten signatures. Electronic signatures are quickly replacing physical or “wet” signatures, especially in digital documents, and companies around the world trust them. 

SOURCE: Talk2Communicate via YouTube

How Does Electronic Document Signing Work? 

Electronic document signature takes place in a digital app on a computer, tablet, or smartphone. Electronic signatures are available in freestanding apps and incorporated into many other apps and systems, including content management systems (CMS) and CLM software.  

Signing a document electronically is as easy as using a mouse, stylus, or even your fingertip to write your signature on a touchscreen device. Some systems let you enter your electronic signature on one device, such as a smartphone with a touchscreen display, and import it into another device that doesn’t have a touchscreen, such as a computer. Other systems let you “write” your signature by typing your name using a handwriting-like font. 

As noted, many contract management systems, including those from Contact Logix, incorporate electronic document signing. The process looks like this: 

1. When both parties approve the contract, the electronic contract is automatically sent to those parties who need to sign it. They may receive an email notification or a message from within the CLM system.
2. Authorized individuals from both parties sign the contract electronically, using a touchscreen device or a handwriting-like font in the CLM software. Because signatures are electronic, both parties can sign simultaneously – no paper contract has to be physically passed from one party to another. 
3. The signed electronic contract is returned to the contract manager for finalization and archiving. Some contract management software solutions like Contract Logix automatically marry the executed contract back into the system without any manual intervention. No physical copies are needed, as electronic signatures are completely legal in most countries. 

There’s more going on behind the scenes, especially regarding security. Each signature created electronically is secured with public key encryption. A private key is used to encrypt the signature and embed the date and time signed and the signatory’s IP addresses. The signature stays encrypted until it is decrypted with the signer’s public key on the receiving end. Any attempts to change the signature midstream invalidates the signature. 

How Do Electronic Signatures Benefit Contract Management?

Electronic document signing is useful for electronic contracts. Instead of manually passing around paper contracts, signing them in ink, and physically storing them in a room full of filing cabinets, electronic signatures on electronic documents do away with all the paper and physical handling. 

Eliminating handwritten signatures results in many benefits. A OneSpan/BMO Insights study found that the most significant were reduced scanning errors (cited by 92% of respondents), improved audit efficiency (80%), and fewer missing files (66%). 

Those are just some of the benefits of electronic document signing. Here are eight more. 

Accelerates Execution

Signing contracts electronically streamlines the execution process. Contracts are no longer hostage to postal service delivery or sit idly on a stakeholder’s desk, waiting for the necessary attention. With electronic signatures, documents are transmitted at the speed of light over the Internet directly to the appropriate inboxes, flagged for immediate action. Instead of taking days or weeks to be signed, as was the case with physical contracts, electronic contracts are typically signed in just 37 minutes.

Minimizes Repetitive Signing

It’s not uncommon for contracts to be revised post-signing, which requires the signatories to resign the amended document. Unlike physical signatures, electronic signatures are valid for the entire life of the contract, eliminating repetitive signing. 

Enables Remote Signing

Being able to sign a contract electronically lets signatories do so from anywhere. It doesn’t matter where stakeholders are located, they can sign on any device over the Internet. This is especially important with today’s increasingly remote workforce and eliminates the need to transport physical contracts cross-country just to get a signature. 

Reduces Errors

With fewer people handling fewer physical documents, the opportunity for human error is significantly reduced. Most CLM solutions won’t let a contract be submitted until each signature field is completed. With electronic contracts, signing mistakes are a thing of the past.

Helps the Environment

Reducing the number of paper documents (and copies of those paper documents) is good for the environment. The more contracts that are created and signed electronically, the fewer trees that need to be cut down. 

Improves Security

It’s easier to secure a centrally stored electronic document than multiple paper copies that float from location to location. In addition, the digital encryption used in electronic signatures makes it next to impossible for malicious actors to tamper with a contract.  

Saves Money

Because electronic signatures cut down both manual labor and the use of paper, costs are significantly reduced. Besides, speeding up contract execution often accelerates revenue collection, generating more money sooner. 

Makes the Whole Process Easier

Finally, and perhaps most important, electronic document signing makes it considerably easier to execute a contract. There’s no more printing, no more manual delivery, and no more waiting on other people to do their jobs. Electronic signatures are fast and easy, benefiting everyone involved. 

How Contract Logix Uses Electronic Document Signature for More Efficient Contract Management

Contact Logix integrates robust and secure electronic document signature processes into its CLM software. With Contract Logix, electronic document signing notifies signatories when their signatures are needed, enables simultaneous electronic signing, and automatically monitors contract execution. When contracts are signed, those electronic signatures are automatically incorporated into the completed digital contracts. It’s all built into the Contract Logix CLM solution so you do not need another app to sign electronically. It’s a convenient way to speed up the contract execution process – and make everyone’s life a little easier. 

Contact Contract Logix today to learn more about electronic document signing. 

Looking for more articles about Contract Management? Check out our previous article “6 Tips for Managing SaaS Agreements with CLM Software“.

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