Digital signatures for efficient contract management

Digital contract management automates the processes throughout the entire contract cycle – making them paperless and location-independent. The digital signature is an essential element.

Companies looking to digitalise the entire life cycle of a contract need more than just a contract management software – they also need an electronic signature solution. These prevent users from having to switch between the digital and analogue processes of printing, signing and then scanning contracts during signing.

What is an electronic signature and how does it work?

With digital or electronic signatures, electronic documents are linked with data in a way that cannot be forged and that is considered a legally binding signature, depending on the signature type and technical method.

The basics are taken care of in the background: data such as the name, e-mail and IP address are captured automatically and used to identify the signatory. It also ensures full transparency in terms of who provided their signature and when. Unlike with analogue signatures, the appearance of the signature is of minor importance.

These days, virtually all handwritten signatures can be replaced with their electronic counterparts. There's only a handful of contracts that require signatures in writing on paper according to law, including terminations and notarised contracts. Contracts required for everyday business can be signed electronically without any issues. Above all, electronic signatures serve authentication purposes and are in no way the same as a scanned handwritten signature.

The different types of digital signatures

Simple electronic signatures do not have to uniquely identify the recipient and signatory of a contract or document any subsequent changes to the signed contract. They're quick and uncomplicated, but legally questionable.

Advanced electronic signatures are generally the best variant. The captured data must enable unique identification of the recipient and the signatory. A data package is integrated in the document that ensures that no changes are made to the document after signing.

Qualified advanced electronic signatures require the most effort. The identity of the signatory has to be verified before signing. This verification is generally performed by a certified trust centre. In turn, providers of trust services have to be certified by bodies recognised by the government. Following personal identification, this level also requires two-factor authentication.

The challenges of introducing electronic signatures

At first glance, switching to digital signatures appears mainly to be a technical and legal matter. Often, the cultural significance that many people attach to handwritten signatures and traditional filing of paper documents is underestimated. Employees have to be just as convinced as business and contract partners.

Once a document has been signed, it can no longer be changed without destroying the signature. Unlike with paper, last-minute corrections or adding attachments later aren't possible. If any changes are made at a later point, all signatories have to provide their signature again.

With qualified signatures, the signatories need qualified certificates. And one characteristic of digital certificates is that they expire at some point. Companies have to keep track of this as well. When an employee leaves the company, their certificate should be voided.

Benefits of digital signatures

Electronic signatures facilitate processes significantly, especially considering that physical signatures require additional effort in times of virtual teams and working from home. Filing the paperwork, the extra time required and mailing the documents all become unnecessary. And companies benefit in other ways, too:

• Electronic signatures save time and money. Contracts can be concluded and take effect much more quickly when signing no longer takes weeks, but just hours.
• It improves the overall customer experience. Electronic signatures are more convenient than having to print out documents, sign them, and return them by mail or fax.
• The risk of contract partners suddenly changing their mind is eliminated. Errors are also less likely than with handwritten signatures.
• Analogue is out of date. With a digital contract management solution, all data is available digitally. Digital filing of contracts in one location enables users to search them.
• A greater focus is placed on data privacy: contracts are no longer sent by e-mail, but are instead stored safely encrypted on corresponding servers.
• Inconvenient steps such as printing, scanning and mailing documents are no longer necessary. This is also good for the environment.
• Signed documents can be accessed from anywhere at any time. In times of remote working, this is an invaluable benefit.

Electronic signatures pay off

There is much to be said about digitalising contract processes and introducing electronic signatures at companies. It's attractive not only for large groups. SMEs can also benefit, and many business partners are already calling for electronic signatures.

Have your contracts signed digitally with ELO for DocuSign. ELO transfers contracts to DocuSign and sends an e-mail to notify the recipient. As soon as the contract is signed, ELO automatically puts it back in the same location.