On the matches tab of the cup for the group stage enter advanced position as below
Teams will not advance till the advance positions have been set. The system won't do this automatically because it doesn't know that all matches have been created that are going to be played.
In addition go to the ENTRANTS tab of the first round of the knockout stage and click on OVERRIDE ROUND ENTRANTS - make sure you have the correct positions from the group stages advancing. If you want first and second place from the groups stage to be available for the next round - add position 2 (1 will already be there)