In a 3-quart saucepan, melt the butter over medium heat. Once melted, stir in the flour and cook, stirring continuously until it begins to bubble. This creates a roux that thickens the soup.

Slowly pour in the chicken broth while stirring. Keep stirring until the mixture thickens. Once the broth is fully incorporated, add the milk gradually and continue stirring until smooth.

Add the shredded cheddar cheese to the soup and stir until fully melted and incorporated. Then, add the diced potatoes and let them cook until tender, about 15-20 minutes.

For a thicker soup, you can add instant potato flakes. If you prefer a thinner consistency, add more broth or milk to reach your desired texture.

Season with salt and pepper to taste. For a flavorful garnish, top the soup with beef bacon bits, extra cheddar cheese, and freshly diced green onions before serving.