How should I apply a late fee to my customers?

Generally, we recommend that people model late payment penalties, early payment incentives, short pays, and bad debt in their AR sub-ledger and not in Projector. This isn't a material source/sink of revenue, and more a small gain/loss based on financial operations. That is, the invoice amount is the invoice amount. If the client short pays or needs to pay more, that should be handled when the cash is applied and should clear against a separate account called AR variance. If you need to apply this late fee within Projector, then a soft cost is the best solution.