Hi Andy,
Maybe I am missing it, but I do not see what kind of radio you are using. Please remember that USB carries multiple signals. In these cases, it carries audio and data, but they are completely independent of each other. Your serial connection (COM7) deals with CAT and controlling your radio. Your audio is completely separate, even though it is on the same cable.
You will need to look at the software audio settings, which generally should be some type of USB Audio CODEC. Then you have to look at your radio settings. This will vary based on which radio you are using. For most modern radios with built in sound card (which I am assuming you have based on your comments) you should have a data or packet mode. In your settings, the audio input for those modes should be set to USB. In most radios I am familiar with, the receive audio is always present on the USB output. If you are seeing nothing on the waterfall, then I would suspect that issue is in your computer or software settings. You might go into your software settings and just try each audio input you see until something shows up on the waterfall.
Tell us what kind of radio you have and what your actual settings are. Pictures and screenshots are always a help. The more information you provide, the better we can help you.
Michael WA7SKG