Once you have installed the module. Click on Invoicing module then Configuration menu and in that Settings. At settings level, specify Penalty Type and based on that specify penalty value in Percentage or Amount.Also, describe Penalty Due Date as shown in below image.

With all this information Invoice Penalty cron job is scheduled to be executed at each day. In that, if invoice due date is today's date or after 3 days of invoice due date then invoice penalty would be generated as shown in below image.

Also, you can easily view that penalty invoice from main invoice smart button as shown in below image.