Payments can also be added to Sales in the Checkout screen, see How do I checkout a Reservation?
Payments are added to a Sale in the PAYMENTS section
Tap + Add Payment, enter the required amount (if needed), tap Loyalty Points
The Loyalty Points Payment will appear in the PAYMENTS section
Alternatively, you may choose to use the Loyalty Points shortcut on the right hand side of the screen
Proceed with adding any other required actions, then close the Sale
Your Customers Loyalty Point balance will be adjusted once the Sale is closed (see How do I view a Customer's Loyalty Points?)