What is an Electronic Signature?
It is undeniable that the world has shifted to more digitally-oriented services over the past decade. This turn towards digitization was set into overdrive with the rise of the Covid-19 pandemic, which made it more important than ever for businesses to be able to work, communicate, and file necessary paperwork remotely.
Electronically-based forms and documents make document and data management processes much more efficient and easier to keep track of. However, many of these documents still need authorization via signatures, which have traditionally been written by hand.
Electronic signatures, also commonly referred to as e-signatures, provide an efficient and secure method for authorizing a document or form digitally. In this article, we will lend our expertise to fill you in on what exactly electronic signatures are and how they work. Plus, we will offer our best recommendations for which electronic signature software to use.
Table of Contents
- What is an Electronic Signature?
- Where to Use Electronic Signatures
- Electronic Signature Use Cases
- What are the Benefits of Electronic Signatures?
- Are Electronic Signatures Legally Binding?
- Electronic Signatures vs. Digital Signatures
- Why You Should Consider an Electronic Signature Software
- What to Look for in Electronic Signature Software
- What are the Best Electronic Signature Tools?
- Final Thoughts
What is an Electronic Signature?
An electronic signature is a digital replacement for handwritten signatures so that legal consent and approval can be provided on electronic documents. The E-Sign Act was federally passed in the U.S. in 2000 and officially recognizes electronic signatures as legal and valid forms of authorization on electronic documents. The E-Sign Act defines an electronic signature as:
“…an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”
The beauty of e-signatures lies in the versatility of this definition, allowing many different methods and solutions to be utilized according to the specific needs of each individual business.
There are many uses for e-signatures and understanding the different ways they can be utilized and applied is essential for getting the most out of them. Where to Use Electronic Signatures
Where to Use Electronic Signatures
You can use an electronic signature on almost any document that needs to be signed. However, there are a few scenarios where using them is most advantageous. These include:
New Employee and Hiring Paperwork
There is a considerable amount of paperwork involved with hiring and onboarding new employees. E-signatures help to expedite this onboarding process and make it easier to store and organize employee information.
Sales & Marketing
Administration work is a major component of sales and marketing work that requires fairly frequent authorization and upkeep. E-signatures offer a solution that can streamline and better manage these processes so more time can be spent focused on making sales, rather than recording them.
While not all documents can be legally signed with an e-signature, there are many business-related documents that can and do accept electronic signatures as legally-binding forms of consent. This can include liability waivers and business contracts.
How to Create an Electronic Signature
When figuring out how to create your ideal electronic signature, it is important to first decide which type of signature fits your needs. There are three main types of electronic signatures:
|Basic (BES)||Any electronic signature that proves authorization through a certificate, such as drawing or typing a signature and clicking on a confirmation button. For example, clicking an “I accept” button, which is typically found near the end of the document.|
|Advanced (AES)||Any electronic signature that requires not only the basic certificate of authorization, but also a higher form of ID verification in order to link the signature to the signee. Specific software known as a Secure Signature Creation Device – or SSCD – is needed.|
|Qualified (QES)||This type of electronic signature is primarily used in the EU. It also requires multi-factor authentication and is considered 100 percent proof of the signee’s identity. A Qualified Signature Creation Device – or QSCD – is needed to create this type of e-signature.|
It’s very important to use the correct level of electronic signature. This is because it can affect the legality of the document.
How to Create an Electronic Signature in Word
Microsoft Word is a program within the Microsoft Office Suite. It is commonly used by businesses for document creation and sharing. As such, understanding how to create an e-signature in a Word document is essential.
Luckily, creating an e-signature in Word is relatively simple. Follow these four steps in order to create an electronic signature in Microsoft Word:
- Place the cursor on the line of text where you want the electronic signature to go
- Click on the Insert tab and locate the Text menu. From the Text menu, click Signature List and then Microsoft Office Signature Line
- Fill in the pop-up box with the required or relevant information
- Once the signature line has been created, right click the signature line to sign
How to Create an Electronic Signature in Google Docs
Unfortunately, the process of creating electronic signatures in Google Docs is not as straightforward. There are two primary ways to create an e-signature in Google Docs:
1. Google Docs Drawing Tool
Google Docs offers a drawing tool that lets you digitally add signatures to a document. However, it is important to note that e-signatures created this way are not always considered legally binding. Therefore, using this method may not always work.
To create an electronic signature with the Drawing tool, follow these steps:
- Place the cursor where you want the electronic signature to go and then select the Insert tab on the toolbar. From the Insert tab select the Drawing tool and click + New.
- The Drawing tool will open a separate window from which you will select the Line tool. From the Line menu, select Scribble.
- Using this tool, the signature must then be hand drawn using a mouse, mouse pad, stylus, or another touchscreen device. Once completed, click Save and Close. The signature should then appear where you placed your cursor initially.
2. Electronic Signature Add-Ons
Since electronic signatures in Google Docs are not always consistent when it comes to the level of certification or authorization, we highly recommend adding on a third-party electronic signature tool to your Google Docs application.
Most electronic signature software, such as PandaDoc, will offer an add-on that can be used for Google Docs-based electronic documents. To access your Google Docs Add-ons, simply follow these steps:
- Select Add-ons in the toolbar menu
- Select the Add-on you wish to use from the drop down menu
- Follow the directions for signing in and connecting your Google account
How to Create an Electronic Signature in PDF
PDF files are commonly used to keep document formatting consistent as a document travels from user to user. In order to create electronic signatures in PDF files, you will need to have access to either Adobe Acrobat Reader or Adobe Sign.
Alternatively, like with Google Docs, electronic signatures can be added to PDF documents with the help of third-party tools and electronic-signature services such as PandaDoc and DocuSign.
How to Create an Electronic Signature on a Mac
Even though Macs are one of Apple’s most popular and successful products, the process of creating an electronic signature on a Mac is complicated. This is because many of the tools provided by Apple do not provide the thorough authorization and authentication needed to verify an electronic signature.
If you are in need of electronic signatures that hold the correct legal authority and want to use a Mac, we recommend using an electronic signature software provider that can help to insert legal and recognized e-signatures into Mac and PDF documents.
Electronic Signature Use Cases
We briefly discussed above the certain cases where it is best to use electronic signatures – including HR, Sales & Marketing, and Legal. Below we cover the most common use cases for electronic signatures and demonstrate how they can optimize these different areas of a business.
Sales & Marketing
Sales and Marketing are two departments that require significant amounts of paperwork and thus would benefit greatly from the use of electronic signatures.
Some of the most common uses for e-signatures in sales and marketing include:
|Customer Forms||There is a lot of paperwork involved in creating new sales contracts and compiling the necessary information from new customers. Electronic documents and e-signatures allow for these processes to be done entirely virtually, thus making these documents more easily organized and stored.|
|Approvals||Especially with custom-made products and projects, having an efficient means for communicating and obtaining approvals for a sales or marketing project is essential. Performing your approvals process electronically will save you time and help you keep better track of who has approved already.|
|Transactions||Electronic signatures are a useful certificate for proving that a transaction was made consensually and signed off on by the paying party.|
Hiring new employees requires a large amount of paperwork that needs to be filled out and returned for processing. Using electronic signatures can speed up this process in an efficient manner.
Some of the most common use cases for electronic signatures in hiring include:
|Onboarding||Onboarding new employees involves a metric-ton of paperwork that can easily be lost, miss-filed, and costly when printed. Electronic signatures allow for onboarding paperwork to be signed and completed with much greater ease and far less waste.|
|Parental Consent||In instances where an employee may still be a minor, parental consent will need to be given. Electronic signatures can legally be used for these kinds of consensual forms.|
|Employee Conduct||Any additional forms or updates to codes of conduct can be created and completed electronically. This is because electronic signatures can verify an employee’s identity.|
Legal departments often deal with time sensitive documents that must be frequently signed by multiple parties. Using electronic signatures allows people to keep better track of the documents being signed and ultimately saves time.
Some of the most common legal use cases for electronic signatures include:
|Business Contracts||There are many different contracts that must be signed and certified throughout the various departments of a business, including employee contracts and customer contracts. Electronic signatures make it easier to get these contracts approved and processed in a shorter period of time.|
|Vendor or Partner Agreements||It is important to send confirmations and approvals of agreements as quickly as possible when finalizing agreements with vendors, distributors, or other partners to your business. Electronic signatures greatly cut down the time needed to send and finalize your agreements.|
|Non-Disclosure Agreements (NDAs)||Electronic signatures that provide recognized and legal certificates of proof can serve as official signatures even on documents such as non-disclosure agreements. Being able to distribute NDAs to be signed quickly is essential when protecting sensitive business information.|
What are the Benefits of Electronic Signatures?
Besides their versatility, electronic signatures provide other benefits that optimize a business’s document workflow. These include saving time, improving document management, and increasing revenue for sales teams.
Understanding these additional benefits is key to getting the most out of your electronic signature tool and all it has to offer to your business. Here are three major benefits that come from electronic signatures:
Save Time with Greater Efficiency
Traditional handwritten signatures are fairly time consuming mainly because they are either sent by mail or have to be physically printed. They also require a lot more resources such as paper and ink. With electronic signatures, this reliance on time and resources is basically eliminated and you cut down the paperwork completion time down from weeks to minutes.
Improved Document Management
The reality is as your business operations scale up, so does the amount of needed paperwork. Keeping track of and managing large amounts of paperwork is burdensome in terms of storage space. Physical copies of documents also make it difficult to find specific pieces of information. Storing documents electronically in one central location makes them easier to access by all authorized parties. It also saves space and makes it harder to lose documents.
Increased Revenue for Sales Teams Who Use Them Strategically
Electronic signatures can greatly impact the overall revenue a sales team is able to bring in. This is because they eliminate time-consuming paperwork signings, which can result in fewer approvals across the board.
Electronic signatures can also save businesses when it comes to operational costs. The cost of creating, completing, and storing documents electronically is drastically lower compared to carrying out these activities with physically printed documents.
Are Electronic Signatures Legally Binding?
As mentioned above, the E-Sign Act classifies an “electronic signature” as a sound, symbol, or process attached to a contract or other record that is executed by a person with the intent of signing said record. However, there are a few other laws that electronic signatures must abide to, depending on the circumstance. This includes:
|UETA||The Uniform Electronic Transactions Act enforces that electronic documents and signatures related to business, commercial, and governmental matters suffice for legal purposes as long as the parties involved agree to proceed electronically. This law is only accepted on a case-by-case basis.|
|HIPAA||The Health Insurance Portability and Accountability Act is a federal law that requires the creation of national standards to protect patient health information from being disclosed without a patient’s consent or knowledge.|
Certain states also have their own electronic signature laws. This includes New York and Illinois, which do not adopt the UETA.
|ESRA – New York||This act provides that electronic signatures will be the same amount of legally binding as hand-written signatures. It also enforces the legality of documents created and retained in electronic form.|
|ECSA – Illinois||It is modeled on the E-Sign Act and specifies that information, signatures, and records cannot be denied legal effect, validity or enforceability solely on the basis that they are in electronic form.|
There are also certain documents that cannot be signed electronically. This includes:
- Adoption papers
- Divorce papers
- Court Orders
- Notices of Termination (leases, utility, etc.)
- Notice of Repossessions
- Notice of Foreclosure
- Notice of Eviction
- Product Recall Notices
Electronic Signatures vs. Digital Signatures
It is important to understand that electronic signatures and digital signatures are not the same thing. They both have a few key distinctions that separate them in their purpose and uses.
While the term electronic signature is used as an umbrella term for many types of virtual identity verifications and authorizations, a digital signature is a specific type of electronic signature that utilizes mathematical algorithms and digital certificates that authenticate a signee.
According to the Cybersecurity & Infrastructure Security Agency:
“Digital signatures create a virtual fingerprint that is unique to a person or entity and are used to identify users and protect information in digital messages or documents. In emails, the email content itself becomes part of the digital signature. Digital signatures are significantly more secure than other forms of electronic signatures.”
Put simply, a digital signature is a more complex and harder to duplicate version of an electronic signature that is considered overall more secure.
Why You Should Consider an Electronic Signature Software
Though there are many ways to create electronic signatures for your documents, we highly recommend using a third-party tool or software provider that can create electronic signatures for you – such as DocuSign, PandaDoc, signNow, and HelloSign.
Here are four key reasons why you should take advantage of using an official electronic signature software:
You Electronic Signature Needs to be Legally Binding
Even though there are many ways to create electronic signatures, not all of these methods are legally binding. Electronic signatures need to be created with a certificate that legally ties the signature to the signee.
Every electronic signature software, including the three mentioned above, guarantee the proper certifications to make electronic signature legally binding. This includes audit reports, which track all of the important activity and changes made to your documents.
It Needs to Comply with the Acts and Laws
Not only does an electronic signature need to be legally binding for the signee, but it also needs to meet a set of requirements and specifications put forth by various acts and laws. Keeping up with legal requirements is, thus, an absolute must. For those in the United States, the E-Sign Act outlines the requirements necessary for electronic signatures to be considered in compliance.
Electronic signature software providers will have entire teams that are dedicated to keeping their software compliant. This way you do not have to worry yourself whether your electronic signatures are in accordance with the law.
It Saves You Time
Electronic signatures in general can greatly improve your overall efficiency. However, they can become time consuming if you are creating them from scratch. If you use an electronic signature software tool, the electronic signatures you make within its platform will be automatically legally binding and compliant. This means you can then spend your time and energy focusing on other business endeavors and concerns.
It Helps with Document Management
Using electronic signatures and electronic documents will greatly improve your experience with document management. Electronic documents can be stored and backed-up digitally, cutting back on the resources needed for storage.
Plus, documents can then be stored in a centralized digital location that is accessible from any device by authorized personnel. This makes accessing documents and working remotely all the more possible.
What to Look for in Electronic Signature Software
There are a handful of critical features you should look for when considering different electronic signature software features. We recommend prioritizing:
Electronic signature tools let you create templates of documents that need to be signed. Some platforms offer their own standardized templates. Templates improve document workflow by saving you time and keeping your content consistent.
E-signature solutions offer document editors that let you add fields that signers need to fill out. You should look into the range of the field types you can add to your document and features that make editing easier – including zooming capabilities, and document navigation by page.
E-signature tools let you deliver your documents through several methods – including by email, in-person, and mass signature. You should consider solutions that let you deliver your documents through all of these methods.
When it comes to document signing, you should look for features that make the signing process easier. This includes having a “Next” button that navigates users to the next field they need to fill out, zooming capabilities, comment making, document navigation by page, and document signature reassignment.
It is important that your solution offers organized and efficient document storage. Solutions offer organizational features like a search bar and the ability to organize documents by status, sender, and date. Advanced solutions will also offer the ability to create custom folders to organize your documents.
What are the Best Electronic Signature Tools?
We determine the best electronic signature software tools based on several criteria. This includes each solutions’ features, usability, price, and customer support. A software is considered above average if it’s rated above 85, and excellent if it’s rated above 90.
Here's a full list of the electronic signature software tools you should explore. We've hand-tested each solution and shared our ratings below. Click on any solution to read our in-depth reviews that covers the pros, cons, pricing, and features of each software tool.
Innovative software solutions, such as electronic signatures, are incredibly impactful in changing the way today’s business industries operate. Paperwork and documentation continue to be majorly important components in successful businesses, and electronic signatures are optimizing those workflows to work more efficiently and thoroughly.
With electronic signature software, you can easily add your certified and secure e-signatures to all kinds of documents, from directly inserting them into Microsoft Word to adding them onto a Google Doc or PDF.
Check out our other articles in our Best Electronic Signature Software in 2021 category to learn more about which electronic signature software solution is best for your business!