I set up my paycheck to automatically report 401k contributions into the 401k account.
I set up 401 k account using 401k manager

Money never deducts the cash from the contribution list. For example if I contribute $100 and then use that money to buy a fund. Money is reporting that I own the fund and still have $100 in cash.

Anyone know what I didn't set up correctly?

I would use the help function, there might even be a tutorial that you can go through.