We show that if the dwarf-nova disc instability model includes the effects of heating by stream impact and tidal torque dissipation in the outer disc, the calculated properties of dwarf-nova outbursts change considerably, and several notorious deficiencies of this model are repaired. In particular: (1) outside-in outbursts occur for mass transfer rates lower than in the standard model as required by observations; (2) the presence of long (wide) and short (narrow) outbursts with similar peak luminosities is a natural property of the model. Mass-transfer fluctuations by factors ~ 2 can explain the occurrence of both long and short outbursts above the cataclysmic variable period gap, whereas below 2 hr only short normal outbursts are expected (in addition to superoutbursts which are not dealt with in this article). With additional heating by the stream and tidal torques, such fluctuations can also explain the occurrence of both outside-in and inside-out outbursts in SS Cyg and similar systems. The occurrence of outside-in outbursts in short orbital-period, low mass-transfer-rate systems requires the disc to be much smaller than the tidal-truncation radius. In this case the recurrence time of both inside-out and outside-in outbursts have a similar dependence on the mass-transfer rate.