Digital signatures are the most secure document approval option available to companies. Some countries, such as the United States, require digital signatures in some cases. In other cases, they are critical to guarantee non-repudiation and eliminate the possibility of tampering.
Important business documents such as contracts, proposals, invoices, etc. are most often shared in PDF format. In this article, you will learn everything you need to know. We'll introduce the definitions, explain the technical infrastructure, and give you a step-by-step guide to safely approve these critical documents.
Do you need a digital signature or an electronic signature?
People often confuse digital signatures with electronic signatures. While there are some similarities, they are more different than similar. Knowing the difference between the two is crucial in determining which is right for a particular document.
What is an electronic signature?
An electronic signature is any digital token contained in a document. If you receive a contract in Microsoft Word and upload a photo of your handwritten signature (or a generic image file with some scribbled text), you've already signed it electronically. Even though they are not as secure as digital signatures, electronic signatures are still fully legally binding.
Some electronic signatures are more secure than others. For example, tools like PandaDoc automatically generate certificates (with date and time) when documents are signed, making it harder for signers to refute their approval later.
What is a digital signature?
Digital signatures, on the other hand, are a highly secure form of approval that relies on techniques such as security keys, encryption, and hashing algorithms. If this sounds like a mouthful, don't worry. The basic concept is relatively simple. In short, digital signature software creates a unique copy of a document linked to you. This makes it nearly impossible for anyone to change the contract or deny that they signed it. Digital signatures rely on public key infrastructure (PKI) for creation and verification.
If you negotiate advanced transactions, file certain types of documents with the government (especially in the U.S.), or work in an industry with a high risk of customer default, your company may need digital signature capabilities.
How do digital signatures work?
Let's explore how digital signatures work with a practical example. Suppose Sally sells Bill a car. She sends the sales contract to Bill, who signs the contract using a personal key (also known as a digital certificate) that he purchased from a certificate authority. In addition to his private key, Bill has a public key that Sally can use to decrypt (but not encrypt) Bill's digital signature.
He logs into his document management application, opens the contract, and uploads his digital certificate. The app uses an algorithm to automatically create a hashed version of the document (essentially a long string of garbled letters and numbers). This is called a summary. The software then uses Bill's key to encrypt the hash. The encrypted digest is a digital signature.
Bill sends the digitally signed document back to Sally along with the public key. She uses the same algorithm to create a new hash and uses the public key to decrypt Bill's created digest. If the two summaries match, then she knows the contract has not changed and was signed by Bill. If they didn't, she knew the document had been tampered with or Bill didn't sign.
How to Add a Digital Signature to a PDF Document
Before you can digitally sign a document, you need to perform some general steps.
First, you need a digital certificate from a registered provider or through a self-signed service like AdobeSign. You cannot add a digital signature to a PDF file without a certificate. Then, you'll also need access to an app that allows you to add digital signatures to documents. AmindPDF can achieve this. Alternatively, you may wish to opt for a more feature-rich solution, AmindPDF offers advanced document management capabilities.
The software can often be configured, for example by setting a visual signature (along with your digital signature) that appears at the bottom of the document when you sign, so you should familiarize yourself with all options and set your preferences.