I am just a hobby builder, so bear that in mind when you consider my method.
I typically cut my lip slot while my balsa blanks are still rectangular, so they're square to the bait's centerline.
After I've shaped my lure, and I've drilled for my ballast and hardware, I'm ready to add the lip. I seal the bait, including the lip slot, with runny super glue, It penetrates the wood, and makes the surface wood stronger and harder than the raw balsa. It acts as a sanding sealer, because it locks the fuzzy surface wood, so it lets me finish sand the lure blank without removing any more wood.
I add my lip before paint. Because the slot has been reinforced by the super glue, I dry fit my lip into it, to be sure that it will slip in relatively easily and that is still properly aligned. Then, after I've roughed up the lip surface that will be in the lure body with 80 grit sandpaper, I add some thicker, gap filling super glue (med. ZAP glue for me) to the lip slot, and push my lip into place. I smooth out any squeeze out with my finger, and then, once I've checked the alignment again, I add a drop of accelerant and let the lure sit for a minute to be sure the glue has set. If there are gaps between the lip and the lip slot, I add a drop of runny super glue to it. The runny stuff will wick into the gaps, and make it solid. Another drop of accelerant, and I'm ready to add my hook hangers, line tie, and ballast.
A word of caution: Have a rag handy to wipe the excess glue off of you finger, so you don't wind up gluing your finger to the blank (been there, done that) and DON'T let the accelerant get onto the glue on your finger. It creates heat when it cures the glue, and that hurts!
I'm sure there are lots of other ways to do the same thing, but this is the way that works for me.