If a sales opportunity does not move down the funnel, the sale will not happen and the opportunity should be removed, hence the “leaky” funnel. A leaky funnel is not necessarily bad; as a salesperson, you want to focus on opportunities that are likely to yield results. It is the nature of sales to have to remove an opportunity from your funnel. It does not mean that you will not sell to that account (a positive action by the customer can put them back into the funnel), but for the time being, you should centre your attention on opportunities that remain in the funnel.
The metaphor of the funnel is used because people drop away at each stage of a long sales process: for example, many of your unqualified prospects may have existing suppliers with whom they're very satisfied. Others may have needs which other competitors are better-placed to satisfy. Still, others may love your products, but not have the budget to buy them.
The first stage in setting up sales funnel reporting is to understand your sales process fully (perhaps using a technique like flowcharting). While sales processes are often quite similar from company-to-company, there can be points of difference depending, for example, on the size of the order and the consequences to the client of making the wrong purchase decision.
I'm not sure how the algorithm works (or if there's one at all), but while I was filling it out, I had some anxiety about not qualifying. Once I found out I did, I was excited to fill out the form, which I'm sure most people who are in debt and using this tool are. By making this offer seem more exclusive before the form appeared on the landing page, I'd bet that Bills.com increased conversions pretty significantly.