Cook bacon until crisp in a large skillet over medium to medium high heat. Remove bacon from pan to rest on a paper towel, and reduce heat to medium. Once cool, chop into ½" pieces. Cook thinly sliced potatoes in remaining bacon fat until crispy and cooked through, approximately 3 minutes per side. Remove from skillet.
In a small saucepan over low heat, melt the butter. As soon as the butter has fully melted, add the flour and use a fork to stir until the mixture is thick, almost like a paste.
Increase the heat to just below medium and slowly pour in the milk, stirring and whisking constantly with the fork to break up any lumps.
Add in the salt, pepper, and nutmeg. Stir to combine. Let simmer and thicken for a few minutes, stirring occasionally, then add the parmesan cheese and stir until smooth and creamy. Remove from heat and set aside.